Step 1: Define the Current Business. Every company must choose the terrain on which it will compete, what products it will sell, where it will sell them, and how its products or services will differ from its competitors. Ask, where are we now in terms of the business we’re in, and what business do we want to be in, given our company’s opportunities and threats, and its strengths and weaknesses. Managers sometimes use a vision statement as a sort of shorthand to summarize how they see the business down the road. The company’s vision is a general statement of its intended direction that shows, in broad terms, “what we want to become. An example is, Rolex and Seiko are both in the watch business, but Rolex sells a limited product line of high-priced quality watches. Seiko sells a wide variety of relatively inexpensive but innovative specialty watches with features like compasses and altimeters.
Step 2: Perform External and Internal Audits Ideally. Managers begin their strategic planning by methodically analyzing their external and internal situations. The strategic plan should provide a direction for the firm that makes sense, in terms of the external opportunities and threats the firm faces and the internal strengths and weaknesses it possesses. To facilitate this strategic external/internal audit, many managers use SWOT analysis. For example, an owner does not want to open up his gas station if it right across the street from a WAWA. In this case there would be more weaknesses and threats rather than strengths and opportunities.
Step 3: Create Strategic Options. The situation may require that management consider strategic options for the company. Based on the situation analysis, what should our new business be, in terms of what products it will sell, where it will sell them, and how its products or services will differ from its competitors’? What is our new mission and vision?
Step 4: Review Strategic Options. Given the situation, which...
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