Strategic planning is about effectively positioning your business in the marketplace. You need to make sure that you conduct a thorough analysis of both your business and your market.
Many strategic analysis models can help with this task, including:
- The Balanced Scorecard - which takes into account objectives, measures and initiatives. See more on the balanced scorecard.
- Strategy mapping - which visually communicates the strategic plan and high-level business goals. Read about strategy maps.
- Strategic gap analysis - which looks at where your business is now, where it wants to be, and how to bridge the gap between. See more on gap planning.
However, the three most popular planning models include SWOT analysis, PESTLE analysis and Porter’s Five Forces framework.
A SWOT analysis is a high-level model often used at the beginning of the strategic planning process. It identifies the internal and external factors that are favourable and unfavourable to achieving a business goal:
- Strengths - aspects of the business that can help achieve the objective
- Weaknesses - aspects of the business that could hinder achieving the objective
- Opportunities - external factors that could help achieve the objective
- Threats - external factors that could hinder achieving the objective
Using a SWOT analysis can help you understand what you're doing well and in what areas you can improve. Find out more and see a SWOT analysis example.
PESTLE breaks the business environment down into the following areas:
- Political - eg changes to taxation, trading relationships or grant support for businesses
- Economic - eg interest rates, inflation and changes in consumer demand
- Social - eg demographic trends or changing lifestyle patterns
- Technological - eg the emergence of competing technologies or productivity-improving equipment
- Legal - eg changes to employment law or to the way your sector is regulated
- Environmental - eg changing expectations of customers, regulators and employees on sustainable development
PESTLE analysis is often used alongside SWOT analysis to help identify opportunities and threats. See our PESTLE analysis example.
Porter's Five Forces analysis
The Five Forces model aims to help businesses assess how competitive a market is. The model looks at:
- your customers' bargaining power - the higher it is (eg: because there is a small number of major buyers for your product or service) the more downward pressure on prices and revenue they will be able to exert
- your suppliers' bargaining power - the ability of suppliers to push prices up (for instance if you rely on a single firm) can impact significantly on costs and profitability
- the threat of new competitors entering your market or industry - more businesses competing makes it harder to retain market share and maintain price levels
- the threat of customers switching to newer products and services - an example would be the threat to DVD manufacturers posed by the wide availability of online video streaming
- the level of competition between businesses in the market - this depends on a wide range of factors, including the number and relative strength of the businesses and the cost to customers of switching between them
Find out more about Porter's Five Forces.