Work guide to prepare the strategic plan

MISSION VISION

• It gives us the breadth of the business frame of reference in which we are going to develop and it can be approached from two senses. The first Where do you want to go? And how are we to get there? The second in reverse How are we? And where do we want to go?

Vision: Relatively remote future where the company develops in the best possible conditions according to the dreams and hopes of the owner or CEO.

Mission: It is conceived as an opportunity to do business that a company identifies within a context of needs, CRITICAL FACTORS OF SUCCESS

• This stage must be addressed immediately before any analysis, general or specific; internal or external We must define what are the necessary elements that must exist to achieve the mission previously defined by the business owners. They must be few and of strategic importance Internal and external aspects that every company in the same industry or sector must meet to achieve success Are those elements whose presence constitutes competitive advantages and whose lack prevent us from fulfilling the mission, such as: Economy at scale in production Economics at distribution scale Certain degree of technological development Professional Image Quality of Service Personalized Service Timely supply Having quality personnel, etc. These should not be confused with environmental variables,among these there is a hierarchy and the environmental variables are members of a set of factors, for example: If we say that “Having quality personnel” is a critical success factor, its environmental variables would be: the market, our process of selecting personnel, our training capacity, career opportunity, pleasant environment, benefits etc.

ENVIRONMENTAL VARIABLES

• They are those that outline the development context and the elements of judgment for the development of strategies It is important to detect trends in relation to the market environment in which we operate, detecting the motivating causes of the current situation They influence one or more critical factors of success in positive or negative way

VACI (Internal Critical Environmental Variables)

• They refer to the organization, the processes, the resources of the company, the personnel, that is to say, to what is called «The Internal Front», product of the qualitative analysis of these Weaknesses and Strengths must be identified

1. Weakness: It is an aspect referred to an internal variable that when analyzed it is verified that it does not meet the desired characteristics Strength: It is an aspect referred to an internal variable that when analyzed it is verified that it meets the desired characteristics

VACE (External Critical Environmental Variables)

• Referring to the context that surrounds the company, the market, the competitors, the economic environment, political environment, social environment, action of the state, the community, the unions, that is to say, what is called “The external front”, the product of this analysis is must identify Opportunities and Threats

1. Threat: It is an aspect of the environment referred to an external variable that when analyzed verifies that we do not meet the desired characteristics to take advantage of it and leaves us in a disadvantageous position Opportunity: It is an aspect of the environment referred to an external variable that when analyzed it is verified that we are able to take advantage of it and it leaves us in a position of advantage

DIAGNOSIS

• Relative to its market environment, it should contain the strengths, weaknesses and limitations, both its own and the market environment, especially the forces of competitors and their plans for future actions should be evaluated, as well as a series of opportunities and threats that derive from the situation of the company itself in relation to the market environment in which it operates. In the preparation of this diagnosis, special consideration will be given to the key success factors. In this diagnosis, the causes that have caused them must be described, the situation current and at the same time partial recommendations are provided on actions to be taken, which will later be analyzed again when mapping out the strategic alternatives.

SCENARIOS

• Possible scenarios in which businesses will be developed must be anticipated, through the generation of a change of attitude towards the future. There are two alternatives

1. The first, to generate this scenario based on the prevailing trends, outlining a “desired future”. The second, to work on the basis of a prospective, that is to say, “Set Goals in an assumed future”

• The diagnosis of the preceding stage should allow the realization of a forecast in which the viability and possible evolution of the company itself and the most important competitors are predicted, specifying the conclusions that have been reached.

THE STRATEGY

• At this point we already have a complete vision of the company, its environment and its relative position, the next step is to plan where we want to go and how to achieve it through a general strategy and strategic and operational guidelines, these strategic and operational guidelines we will lead to the formulation of specific plans. Strategic Guidelines: Lines of action or policies that, in their application, help to fulfill the general strategy and achieve critical success factors. Operational guidelines: Lines of action or policies that in their application will tend to overcome weaknesses, maintain strengths, take advantage of opportunities and neutralize threats. To choose the general strategy of the company, it is necessary to previously develop a process of identifying objectives through a formal process by stages

OBJECTIVES

• After carrying out the diagnosis and forecasting the scenario, the objectives of the company to be achieved in the coming years will be decided.These objectives must be rationally achievable and must depend on the strategy chosen

A. CHOICE OF BASIC OBJECTIVES

• Those SHORT, MEDIUM and LONG TERM objectives will be chosen that best suit the interests of the company, and may choose to:

1. Profit Growth Security Liquidation of the company

B. POSSIBLE STRATEGIC ALTERNATIVES

• For the achievement of the basic objective or objectives (two or more can be pursued at the same time, such as: growth and profit at the same time) the possible strategic alternatives will be studied:

1. Expansion Stabilization or consolidation Partial decline Total decline

• For the implementation of these alternatives, the product-market scope of possible action must be chosen, in parallel the recommended actions in the diagnosis will be taken into account. The product-market area in which you possess or may OWN SUPERIORITY over the COMPETITORS will be sought selected will involve a study of future geographical areas and segments of action, as well as the positioning that should be given to each product. Once the product-market scope of possible action has been decided, the key success factors will be taken into account again deciding “which of the differential advantages of the company will be used as the main driving force ”, as well as for example: Lower costs Superior financial resources Wide and organized distribution networkBetter image of products, etc. This main driving force will provoke a series of strategic movements necessary for the success of the strategy that will take place:

Strategic movement in the market product area

• They will be all those actions that must be carried out with the products and with the markets, understanding by the latter both the geographical areas and the sectors

Strategic movement in the environment in which the company is located

• Are the different actions the company if the sun (in the case of large multinationals) or groupings of an entire sector (steel industry, appliances, etc.) undertaken with the hope of changing the conditions of the environment, understood by such: The economic situation and evolution The political-legal situation and evolution The socio-cultural situation and evolution The situation and evolution of technological development

Strategic movement in the company itself

• These movements involve making decisions about the size of the company, which may involve: Continue with the same dimension Increase the dimension Reduce the dimension Any movement that is made about the company itself, implies modifications in any of the following sections: Name and company ownership Financial structure Company location Buildings facilities Furniture Organizational structure Management Team Management styles and philosophy Resource, capabilities, operations Commercial Technical office Procurement Production Logistics Administration Finance

Strategic movements with other companies

• These movements involve the possibility of Unions, integrations, temporary pacts, mergers, acquisitions, etc., with other companies, which is based on the availability of entry. In principle, these movements can be classified into:

1. Vertical integration

• Vertical upward integration: when performed with suppliers Vertical downward integration: when performed with a direct customer

1. Horizontal integration

It occurs between companies in the same industry or sector

1. Conglomerate

It occurs between companies belonging to different industries or sectors

C. CHOOSING THE FUTURE STRATEGY

• From the different strategic alternatives proposed, analyzed and valued, the most appropriate will be chosen, which will be subsequently applied. The choice of strategy will be applied based on the expected implementation costs. The expected results The level of risk the application entails The estimated probabilities of success

D. THE CHOICE OF THE COMPANY'S OBJECTIVES

• Depending on the strategy that has been chosen and the results that are expected to be achieved with it, the objectives of the company can already be established.These must be drawn up in the Short Term Medium Term Long Term And each of them will be subdivided into two aspects

Quantitative

• Market share Sales Margins, profits Return on investments

Qualitative

• Work environment Company image Own technology

TACTICS

• The strategy marks the paths through which the future actions of the company must take. Subsequently, each of these actions must be implemented through tactics or operational plans that will require more depth in the necessary information such as quantitative studies, motivational studies, costs, technology, etc., as well as greater detail in the specifications. Each department, function of the company, must carry out its own operational plan. The spearhead or key plan will be the Marketing plan that will condition the rest of the company's plans. Operational plan must consist of: Departmental or functional objectives Actions to be carried out by the department or function Programming and coordination of said functions with each otherDepartmental or functional budgets Establishment of departmental or functional controls

GENERAL BUDGETS

• Each company department should develop its own justified budget, which subsequently will result in: Budget Commercial Production Budget Budget inventory levels Budget shopping Budget overhead or structural budget results atypical Investment Budget Budget financial expenses Budget Fiscal Benefit Distribution Budget Each of these budgets is planned from two different approaches:

A. GENERAL ECONOMIC BUDGET

• It will be the result of the economic budgets of the different departments In the month in which the economic events of the company are expected to occur: sales, purchases, advertising, amortization, etc. Being able to simulate and approximate the expected result of the year, it reflects the valued forecast of the economic events in the month in which they occur Example: in the month of January the sales expected in that month are confirmed although it is expected to collect them in March Example: in In January, the expected expenses for the purchase of raw materials in that month will be recorded, although the payment forecast corresponds to March.

B. FINANCIAL BUDGET

• It will be the result of the financial budgets of the different departments, in which the inflows and outflows of money are foreseen in the month in which they occur, being able to simulate and approximate the monthly cash flow. It contains the estimated forecast of the inflows or outflows of money from the company as a result of the different economic events that are expected to be carried out Example: in the month of March the expected income due to sales made previously will be recorded Example: in the month of March it will contain the estimated payments for material previously acquired premium

PROGRAMMING AND COORDINATION OF ACTIONS

• They are set up to comply with the strategic and operational guidelines They clearly set out the actions necessary to achieve the objectives of each plan (usually linked to some guideline), managers, necessary and assigned resources, deadlines and expected results or products.Each department or function of the company must establish their own schedule of actions to be carried out based on the actions foreseen in the marketing plan, coordinating them with each other and with the actions of the other departments, which will lead to the general programming and coordination of the company. use of graphics such as Pert or Gant

ESTABLISHMENT OF CONTROLS

• It is the complementary element there is no plan without control, it cannot be controlled without plans The advancement and fulfillment of the approved plans can be formally established at predetermined times or they may have a permanent nature that senior management performs when receiving information about the business and its context and comparing it with the socialized strategies and guidelines. Each department or function of the company must establish its own system of controls, to subsequently follow the result of the planned actions while checking whether its application is still justified or should be modified. The departmental controls will give rise to the management card or general control of the company, which will reside in the hands of the management.

CONTINGENCY PLAN

• They are alternatives to the main plans in the event that the assumptions are not given. Not necessarily the competition, the clients and even our own organization react as expected. Finally, it must be pointed out that the implementation of strategic planning implies a high degree of flexibility to to be able to modify it quickly when the circumstances advise it. One way to achieve this flexibility is to provide the operational echelons with great autonomy within strict responsibility.

However, any change that must be made in the strategy must be truly justified, otherwise it must persist stubbornly in the execution of the plans outlined despite the minor changes that have arisen circumstantially.

Lic. Adm SANDRO CRUZ LEYVA

[email protected]

National University Of Liberty

Trujillo - Peru

January 2002

Suggested Category: Strategic Planning

As a complement to the text, the following video-workshop is recommended, from the National Institute of the Entrepreneur and the Ministry of Economy of Mexico, taught by the expert in design and execution of the business and performance strategy, Jose Luis Delgado, through which you can learn how to design a Strategic Business Plan.

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