The Strategic Planning Process:
The Strategic Planning Process involves numerous steps in evaluating the effectiveness of a firm’s performance relative to its competitors. To assess each of the components of a business, selected evaluative tools must be used. The tools are meant to serve as guidelines and not specific decision points. Management must decide upon the most appropriate pathway for the firm to follow given the input from both the internal and external environment.
The I/O Model [Industrial Organization] advances the notion that the external environment plays the major role in deciding the firm’s strategic actions.
The Resource-Based Model states that the internal environment, in terms of its resources and capabilities, is more critical to the determination of strategic actions than is the external environment.
I/O Model Resource-Based Model
A firm exits in an Industry. In this industry, there are five main forces that suggest an industry’s profitability (its rate of return on invested capital relative to its cost of capital):
The industry’s structural characteristics are important to understand in order to position the firm to compete effectively.
Key to the evaluation of a firm’s internal and external environments are the following evaluative tools. Each must be thoroughly considered before a strategic action can be taken.
Mission statement Analyze the Mission Statement and its components
SWOT analysis Conduct a Strengths, Weaknesses, Opportunities and Threats analysis. Use the data to construct a TOWS Matrix.
IFE/EFE Matrix Internal and External Factors of the firm are evaluated and given weight as to importance in the firm’s ability to perform.
Competitive Matrix Assess the competition and develop a profile of the evaluative criteria used to monitor the