Strategic Plans

© 2017 Robert J. Powers, all rights reserved

NOTE ON STRATEGIC PLANS

By far the single most important assignment in this course is the strategic plan. I urge you

to do this assignment in pieces as we cover the topics and to ask any questions you might have

as we go along.

The outline below will be useful to you for this assignment. I will provide more guidance in

this note. In fact, this document explains how to get 100% of the content and analysis points

available for this assignment.

Since the entire strategic plan is covered in this note, the topics will not make a lot of sense

until we cover them. Consequently, I suggest that you reread it periodically. You will also find

this document helpful for other assignments.

Real-world strategic plan outline

A typical strategic plan has the following sections:

1. Executive summary

2. Company background

3. Vision

4. Mission statement

5. Values statement

6. SWOT analysis

7. Long-term objectives

8. Strategic analysis and choice

9. Short-term objectives and tactics

10. Financial projections and analysis

11. Critical success factors

12. Controls and evaluation.

Some of these sections deal with implementation that are critical in practice but are beyond the

purposes of this course, while others are unnecessary. As a result, you may omit the following

sections:

5. Values statement. This is optional if your organization does not have a values statement.

10. Financial projections and analysis. This is critical in the real world, but it will be very

difficult for you to get enough information for an in-depth financial analysis.

12. Controls and evaluation. This is also vital in a real situation, but again, you will find it

extremely difficult to do with limited information.

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General approach

The purpose of a strategic plan is to provide a “framework for managerial decisions” (p. 41)

to provide the managers with “unity of direction” (p. 39). In this way, all functions of the

organization will reinforce the others as they make progress toward their goals. The four major

steps are to:

1. identify candidates for each key element of the strategic plan,

2. analyze each candidate,

3. make a clear and specific recommendation for each key element, and

4. justify each recommendation by citing previously stated facts (including explicit

assumptions), analysis of those facts, any prior decisions, or some combination.

Using an analogy from the world of journalism, I want you to approach this as a columnist,

not a reporter. A reporter explains the situation and sometimes some of the background, but

that’s all. A columnist goes further by suggesting how to fix the situation and why that fix will

work.

Focus. I want you to focus on one business. If the organization has multiple businesses, the

subject of your strategic plan must be at the business level of text Exh. 1.3 (described on pp. 6-7).

Summary approach. The outline above is a guide to a process of interrelated steps, not

independent tasks. As you go forward, check that the items tie together, and prove that point

as part of the justification.

For example, we will look at strategic issues and the mission statement (item 4). Your long-

term objectives (item 7) must be consistent with the SWOT analysis (item 6) and lead the

organization to that mission; if not, then either they or the mission need modifying.

The same will be true to the end: Your strategic analysis and choice (item 8) must take

advantage of strengths and opportunities (item 6) and avoid weaknesses and threats (item 6) to

meet the long-term objectives (item 7). Similarly, each successive item must be consistent with

all previous items.

Then, as you follow the process, keep looking back. At each step, double check all the

earlier steps because you might have uncovered something that affects an earlier decision. I

will not expect you to go back and make all the necessary changes, but that is exactly what you

would do in the real world.

Accordingly, the best overall approach is to do the core steps is order:

1 All page, exhibit and chapter citations in this note are to the Pearce & Robinson Strategic Management 13e text,

unless otherwise stated

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1. Company background

2. Vision

3. Mission statement

4. SWOT analysis

5. Long-term objectives

6. Strategic analysis and choice

7. Short-term objectives

8. Tactics

9. Critical success factors.

These constitute a process of interrelated steps, not independent tasks, to develop a plan. As

you go forward, check that the items tie together and prove that point in your write up.

For example, your long-term objectives (item 5) must be consistent with the SWOT analysis

(item 4) in the environmental analysis and lead the organization to the vision; if not, then

something needs modification.

The same will be true to the end: Your strategic analysis and choice (item 6) must take

advantage of strengths and opportunities (item 4) and avoid weaknesses and threats (item 4) to

meet the long-term objectives (item 5). Similarly, each successive item must be consistent with

all previous items.

Then, as you follow the process, keep looking back. At each step, double check all the

earlier steps because you might have uncovered something that affects an earlier

recommendation. I will not expect you to go back and make all the necessary changes, but that

is exactly what you would do in the real world.

When this is all done, you write the executive summary, because you will not be able to do

it until the paper is complete! More details about all these sections are in later sections of this

document.

Justification. As you prepare your plan, you must describe the chain of logic that explains

how each conclusion and decision will lead to success and is consistent with all previous steps.

Do not assume the reader remembers all the detail, and do not make the reader go back through

your plan. Instead, explain each conclusion and decision and then back it up with solid

justification. In addition, do not add any new information in the paragraphs which justify

conclusions or recommendations–use only the facts and analysis that have been already

presented.

The best justification consists of previously mentioned facts (including explicit

assumptions), analysis of those facts, prior conclusions, prior recommendations, or some

combination, such as:

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A big opportunity lies in capturing more sales from our existing customers

since they are very satisfied with our products and services (Exh. 4) but

purchase an average of only 22% of this category from us (Exh. 5).2

Let me repeat the key points because it is vital to your earning a good grade:

Back each conclusion and recommendation with solid justification,

which consists of previously mentioned facts (including explicit

assumptions), analysis of those facts, prior conclusions, prior

recommendations, or some combination. Do not add any new

information in the justification.

Remember that you cannot merely say something like, “This recommendation is consistent

with the vision, mission and SWOT”–you must explain why that is so.

The subsequent sections provide more detail about various sections of the plan.

Most of the plan will be your creation

You are not expected to critique an existing strategic plan even if you could find one. Your

task is to create a successful strategy. You are expected to research the company, if possible,

and changes in the business environment for the SWOT analysis, but everything else will be

your original work.

Company background

It will be helpful to your reader to describe the organization. Since you will provide more

detail in later sections, particularly the SWOT analysis, you do not need to be exhaustive here,

although you must identify which of the three criteria apply (in serious trouble, facing

disruptive change, not yet in operation) and evidence for the first two.

Vision

Your organization may have a vision and a mission statement, although they may be called

by different names. If it does, you need to analyze it according to the concepts in the text, and

decide whether it is good or bad. If it is bad, then you create a new one that is good. In all

cases, be sure that the vision and mission statements adhere to the working definitions of this

course.

Your organization might merge what we in this course call the vision and mission

statement. That is perfectly all right, but be sure to treat each half separately as explained

below.

Note that some examples of vision and mission statements in the textbook do not comply

with the authors; definitions, which are repeated in this note.

2 This example and all others in this note are my work or the work of others. Any student who paraphrases any or

uses one as a template has committed plagiarism.

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Recommendation for the vision. The first recommendation of a strategic plan is the vision,

which looks externally and explains–without mentioning the organization or its offerings–how

the organization will make the world a better place. An example is, “We see the world free of

infectious disease.”

The vision ought to motivate and guide the employees, as is true of the example above. An

overly broad vision provides no guidance; an example is, “We see a world in which all needs

are satisfied.”

Other common mistakes with the vision are:

 it is not a description of a better world

 it includes the organization’s industry, offerings or actions.

Justification of the vision. None is required, but if you think the reader might not

understand, you ought to explain why it looks externally and how the organization will make

the world a better place. (A paraphrase of this or any other example in an examination or

assignment is an act of plagiarism.)

Mission statement

Recommendation for the mission statement. The mission statement explains at a high level

how the organization will achieve its vision, namely by identifying its core competencies and

operating philosophies. Supporting the example vision above, an example of a mission

statement is “Our research staff will use proprietary methods to develop new therapies to

combat infectious disease. Our best-in-class manufacturing plants will produce pure and

effective therapies. We pledge to treat our test subjects, employees and suppliers with the

highest standards of ethical behavior.”

Common mistakes with the mission statement are:

 it comes before the vision

 it contains no core competence

 it is unclear what is special about a core competence

 a listed core competence is a strength but not skill or capability

 it contains no operating philosophy.

Justification of the mission statement. Explain how the mission statement will help the

organization achieve the vision. In this example, we would show how our proprietary research

methods and manufacturing talents pertain to infectious diseases rather than to curing cancer.

In addition, if the mission statement does not use the phrases “core competencies” and

“operating philosophies,” then identify them.

An example for the mission statement above is “As each new therapy to combat infectious

disease is developed and produced with our core competencies of proprietary research

techniques and manufacturing capabilities, another infectious disease becomes less prevalent or

even eradicated, getting us closer to the vision of a world free of infectious disease. The last

sentence describes our operating philosophy.”

Common mistakes with the justification of the mission statement are:

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 it does not explain how it achieves the vision

 core competencies are not identified

 operating philosophies are not identified

 a core competence or operating philosophy is discussed but is not in mission

statement.

Values statement

This section is optional. If your organization has a values statement, describe it and make

any recommendations which you see fit.

SWOT analysis

SWOT analysis is dealt with in Chap. 4 and 6 of the text, and especially Note on SWOT

analysis. Be sure your SWOT elements are consistent with the working definitions in that note.

Most opportunities and threats will be:

Opportunities Threats

higher sales (unit or dollar) lower sales (unit or dollar)

more market share less market share

more customers fewer customers

more profit less profit

better reputation for something specific lose money

bankruptcy

better reputation for something specific

You must research strengths and weaknesses, if possible, and environmental factors with

current, professional sources as described in the section “Academic resources” of the syllabus.

As Note on SWOT analysis says, your paper must describe the key SWOT elements well (step

4). This includes an explanation of each strength and weakness, and a description of the

combination of strength(s)/weakness(es) and environmental factor(s) that create each

opportunity and threat.

Be sure to avoid common mistakes with SWOT analyses. As described in Note on SWOT

analysis, it is easy to confuse evidence of strengths with real strengths, and symptoms of

weaknesses with real weaknesses.

Opportunities describe success. Actions (“Launch a new product”) and environmental

factors (“A fast-growing market”) are not opportunities, although they might contribute to

them. Similarly, threats are possible negative outcomes and not environmental factors (“A

looming recession”), although again they might help to create threats.

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Another common mistake is to omit the combinations of items that create opportunities and

threats. Each opportunity is the combination of strength(s) and environmental factor(s), while

each threat is the combination of weakness(es) and environmental factor(s).

Long-term objectives

After the SWOT analysis come the long-term objectives. These are the milestones the

company needs to reach in a few years to validate that all opportunities will have been achieved

and all threats will have been avoided. Long-term objectives take advantage of key strengths,

in light of key weaknesses. Part of the strategic plan might involve fixing the weaknesses.

Be sure the long-term objectives are consistent with the working definition. Specifically,

long-term objectives define success unambiguously, which means each usually contains a

quantitative measure so it is clear whether they reach the goal, they include a date, and they say

little if anything about the market, product or functional elements. Examples are:

 annual sales of at least $100 million in the Asia-Pacific region within five years

 reach breakeven by year four

 increase customer base by at least 10,000 within three years.

Once these objectives are set, we can assess the strategic plan which we will develop by the

likelihood of meeting them. The text describes other characteristics of long-term objectives to

use in formulating them for your organization.

Make sure that the dimension of the opportunity/threat and corresponding objective match.

For instance, if the opportunity/threat is about revenue, then the objective must also be about

revenue, such as “$50 million within three years.” Examples of other matches are:

Opportunity/Threat Long-term objective

unit sales unit sales

revenue revenue

market share unit sales or revenue

profit profit

breakeven profit or maximum loss

customer base customer base

How many objectives should you recommend? That depends on the SWOT analysis:

Enough to show that the organization will achieve all opportunities and avoid all threats.

To ensure that the long-term objectives validate that all opportunities will have been

achieved and all threats will have been avoided, I suggest the following process:

1. Create a long-term objective for the first opportunity.

2. Look at the next opportunity. If the organization meets the first objective, will it also

achieve this next opportunity? If yes, then continue to the next step; if not; create

another objective for this next opportunity.

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3. Look at the next opportunity. If the organization meets all objectives so far, will it

also achieve this next opportunity? If yes, then continue to the next step; if not;

create another objective for this next opportunity.

4. Repeat step 3 until the last opportunity.

5. Create a long-term objective for the first threat.

6. Look at the next threat. If the organization meets all objectives so far, will it also

avoid this next threat? If yes, then continue to the next step; if not; create another

objective for this next threat.

7. Repeat step 6 until the last threat.

Avoid common errors such as using ambiguous measures of success (like market share),

using ranges (like “$10-15 million”), omitting a date, using a date less than two years away,

providing a series of short-term goals (like “10% sales growth for five years”), an incomplete

objective (such as “introduce a new product in line A within two years”), or faulty logic of a

long-term objective (like “increase sales of product C from 10% to 20% of the total”).

Recommendation for long-term objectives. In summary, the recommendation for a long-

term objective consists of an unambiguous measure of success with a date roughly 2-7 years in

the future. All opportunities and threats must have at least one corresponding long-term

objective.

Common mistakes with long-term objectives are:

 ambiguous measure such as market share

 at least one opportunity or threat has no corresponding long-term objective

 an action instead of success

 a range of numbers (“50% profit growth in 3-5 years”)

 a series of short-term objectives (“10% annual sales growth for five years”)

 gap in logic (“100% increase in sales for a new product [or business]”)

 gap in logic (the opportunity/threat is about profit, but the corresponding long-term

objective is about revenue [or vice versa]).

Justification of long-term objectives. You justify long-term objectives by checking that they

fit the working definition, and showing at a minimum that:

1. meeting each means that an opportunity is achieved or a threat is avoided (or both),

2. by meeting all long-term objectives, the organization achieves all opportunities and

avoids all threats, and

In addition, you might show that the objectives move the organization closer to the vision.

Strategic analysis and choice

You will select one or more of the following appropriate grand strategies to achieve the

long-term objectives:

 concentrated growth

 market development

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 horizontal integration

 product development

 innovation

 vertical integration

 turnaround.

I consider some definitions in the textbook as too narrow. In particular:

 with market development, you are focusing on a new group of customers with either

an existing or a new product

 with product development, you are offering something new to either an existing or a

new group of customers

 innovation is broader than a radically new product but can be something radically

new in any function such as manufacturing (Henry Ford) or distribution (J. D.

Rockefeller).

You have at least three tools to use in the text: “SWOT Analysis Diagram” (Exh. 6.2) which

suggests strategies based on the SWOT, the “Grand Strategy Selection Matrix” (Exh. 8.10), and

the “Model of Grand Strategy Clusters” (Exh. 8.11). Although these tools may not necessarily

provide the best conclusion for your unique situation, you ought to use at least two. Applying

judgment to the results of those tools and using other appropriate analyses will lead to the

selection of one or more suitable grand strategies.

The input to a matrix consists of the two axes, while the output is the content. Let’s use the

“SWOT Analysis Diagram” (Exh. 6.2) as an example. Start by comparing the strengths and

weaknesses from the SWOT analysis. If you believe that strengths outweigh the weaknesses,

then the organization is on the right-hand side of the matrix. If you also believe that

opportunities outweigh threats, then the organization is on the top of the matrix. The output is

the content of the top right cell, which is an aggressive strategy.

The most common mistake regarding the use of any of these tools is claiming which

cell/quadrant the organization falls in without explaining why. You need to explain two things:

why the organization falls on one side of the horizontal axis, and why the organization falls on

one side of the vertical axis. That determines both the proper cell/quadrant and solid

justification for that conclusion.

Other common mistakes with the matrices are:

 saying the organization is in two quadrants

 using organization growth instead of market growth in Model of Grand Strategy

Clusters

 providing no evidence for growth or competitive position in Model of Grand

Strategy Clusters

 “fishing” for the desired content in a cell/quadrant rather than using the two axes as

input.

Recommendation for grand strategy. Be sure to recommend at least one or two appropriate

grand strategies, rarely three and never four or more. Concentrated growth alone is not

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appropriate for an organization which is in serious trouble, facing disruptive external change,

or not yet in operation. Concentrated growth is never appropriate for an organization not yet in

operation, because it has no market and no product.

Justification of grand strategy. At a minimum, grand strategies are justified by:

1. showing why each

a. is consistent with the results of at least two of these three tools, “SWOT

Analysis Diagram” (Exh. 6.2), “Grand Strategy Selection Matrix” (Exh. 8.10)

and “Model of Grand Strategy Clusters” (Exh. 8.11),

b. is recommended, if it is not consistent with the matrices,

2. showing that pursuing each will accomplish at least one long-term objective,

3. showing that pursuing all recommended grand strategies will lead to the

accomplishment of all long-term objectives,

4. explaining why the other grand strategies in the one quadrant selected per matrix do

not apply, and

5. perhaps by explaining why the grand strategies will realize opportunities, avoid

threats, or some combination of these

6. tying at least one grand strategy to generic strategies, if they are included.

In addition, you might show that the strategic choice moves the organization toward reaching

its vision.

Short-term objectives

The short-term objectives adhere to the working definition of “objective”–they must be

unambiguous and measurable, and have a date–and each long-term objective must have a series

of short-term objectives that lead to the achievement of the long-term objective.

Short-term objectives depend on long-term objectives: Each long-term objective must have

one short-term objective with the same dimension, such as unit sales or dollars of profit. There

are often companion short-term objectives such as in the example below.

Short-term objectives also depend on strategy. Let’s take a business with $10 million in sales

today and a long-term objective of $25 million in 5 years. If the strategy is product development

and market development, then it will take over a year before it sees substantial sales. As a

result, one short-term objectives is sales of $12 million in the first year.

However, if the same business had a strategy of horizontal integration instead, then that can

be completed well within a year, and one short-term objective is sales of $20 million in the first

year.

Recommendation for short-term objectives. Be sure to identify an unambiguous measure of

success with a date within a year for every short-term objective. Each long-term objective will

have a set of short-term objectives which comprise complementary steps such as:

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 long-term objective: sales at least $25 million in Year 5

o short-term objective: sales at least $2 million in Year 1

o ST objective: factory is ready to ship within 8 months

o ST objective: salesforce is qualified within 6 months

Common mistakes mirror those of long-term objectives.

Justification of short-term objectives. Short-term objectives are justified by showing, at a

minimum, that:

1. each is consistent with at least one long-term objectives,

2. each is consistent with the recommended strategy, and

3. meeting all will accomplish all long-term objectives.

In addition, you might show that the short-term objectives move the organization toward its

vision.

Common mistakes with the justification of short-term objectives include failing to tie each

short-term objective to both a long-term objective and grand strategy.

Tactics

Your strategic recommendations consist of grand strategies, which are conceptual. To win

the competitive battle, you need to recommend concrete actions which will put your strategy

into effect. As a result, this section is the most important: A brilliant strategy with mediocre

tactics will fail.

I suggest reviewing your recommended grand strategies to identify what each function

must do to implement the strategy. Be sure to include support roles. For example, a major

marketing move might require changes in operations, IT, finance and human resources.

Recommendation for tactics. Keep recommendations at a high level. For instance,

discussion of a promotional campaign makes no sense without the context of the marketing

strategy. Outlines of tactics for the appropriate grand strategies are below. Be sure to provide

details for each item.

 concentrated growth

o target market

o primary benefit for customer

o changes to existing actions?

 market development

o target market

o primary benefit for customer

o product

o how to reach customers with distribution

o how to reach customers with promotion

o more?

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 horizontal integration

o target market

o primary benefit for customer

o criteria of company to be acquired

o more?

 product development

o target market

o primary benefit for customer

o description of new product(s)

o how to reach customers with promotion

o more?

 innovation

o area

 product

 distribution

 operations

 other

o primary benefit for customer

o more?

 vertical integration

o benefit sought by the organization

o criteria of company to be acquired

o more?

 turnaround

o area(s) and weakness

 product

 sales force

 operations

 other

o more?

Common mistakes with tactics include being too low-level, not being specific, and being

insufficient to accomplish short-term objectives.

Justification of tactics. Tactics are justified by showing that:

1. each set helps achieve at least one short-term objective,

2. each set is consistent with at least one grand strategy, and

3. all sets will accomplish all short-term objectives.

In addition, you might show that the recommendations for tactics move the organization closer

to the vision.

Common mistakes with the justification of tactics include failing to tie each set to both short-

term objectives and strategy.

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Critical success factors

This section identifies the two or three most important items–already discussed–which pose

the most risk to your strategic plan. If, for example, success depends on the launch of a new

product line, then a critical success factor might be that it is completed on time.

Final checklist

After you have put the paper together, review it and ask yourself:

 Does the paper flow logically?

 Is the vision clear with a view totally external of the organization?

 Are the mission statement and objectives clear and justified?

 Is each conclusion and recommendation clear, specific and consistent with our

working definitions?

 Is each conclusion and recommendation well justified?

 Are the spelling, grammar and logical flow perfect?

 Does the paper include formatting elements like headings to help the reader?

 Have you clearly identified every word, fact or idea that is not original and properly

cited it?