Within the scope of strategic planning, a comprehensive review of the market, the in-house potential, and the competitive structure are undertaken. The old principle of "structure follows strategy" is outdated. Current research has demonstrated that companies are most successful if they accomplish a perfect synchronization of market side with internal resources.
With regard to strategic planning, we start with the result. The analysis itself is not the important part, but the "so what" is.
When considering the entire company, it is important to optimally coordinate the combination of its individual business units. As a consequence, the final result focuses on acquisitions, business unit sales, and the leverage of synergies.
The instruments that are deemed most useful are the portfolio analyses of the first, second, and third generation. The analysis of the first generation (also known as BCG and the McKinsey Matrix) compares market attractiveness with competitive strength. Its aim is to balance investment resources among the individual units. These matrices, however, neglect the relationship between the parent company and its strategic business units. The matrices of the second generation consider the parenting advantage in order to address this deficit. A business unit should be part of the portfolio only if it will generate more value within the parent company than within a competitor. Within the third generation, risk-related aspects are taken into consideration as well. A business unit with mediocre performance but low risk could play an essential part in increasingly volatile markets.
Market opportunities have to be optimally matched with internal resources on the level of the strategic business unit (SBU). It is important to fully understand market volume, market growth, customer trends, value drivers in the industry, etc. on the market side. Core competencies and competitive advantages have to be worked out on the resource side. It is also reasonable to use key performance indicators in order to ensure comparability of the individual SBU.
The result on the level of the SBU is usually a restructuring of the functional strategy (sales, marketing, production, technology, procurement, HR, etc.). It is meaningful to focus on those functional strategies that can be assigned to the primary value driver.
The combination of resource-based and market-based information enables meaningful strategic planning. In essence, the result consists of three parts on the content side:
- Long-term assumptions on market development;
- Specific action plans regarding acquisitions, company sales, and leverage of synergy potentials, and
- Newly focused functional strategies.
Additionally, strategic planning should be transferred to and permanently implemented in the company. Only a pragmatic and revolutionary process enables companies to react flexibly and quickly to changes in the market.