DEVELOPING A STRATEGIC PLAN (Pt 1)

Mission Statement

The first step in the strategic planning process is an assessment of the market. Businesses depend on consumers for their existence. If you are facing a rapidly growing consumer base, you probably will plan differently than if your clientele is stable or shrinking. If you are lucky enough to be in a business where brand loyalty still prevails, you may take risks that others cannot afford to take. Before you begin to assess the market, it is important that you complete a careful assessment of your own business and its goals.

The outcome of this self-assessment process is known as the mission statement. According to Glueck and Jauch (1984, p. 51),The mission can be seen as a link between performing some social function and the more specific targets or objectives of the organization. Another definition states that the mission statement is a term that refers to identifying an organization's current and future business. It is viewed as the primary objective of the organization (Rue and Byars 1983, p. 99).

Because these authors are writing for an audience of managers or would-be managers of larger businesses, their definitions may sound a bit lofty. If, however, you go back to the earlier example of a successful small business, you can see it started with a clear direction -- what was to be achieved and, in a broad sense, how best to achieve it. While your own goal may be to survive, make a profit, be your own boss or even be rich, your business must first perform a social function, i.e., it must serve someone. Given this you must determine (1) the ultimate purpose and (2) the specific targets or objectives of your business.

The investors of Franchise A discussed above clearly had determined they wanted a business with the potential for international sales. With this objective they were able to determine the kind of franchise they wanted and the terms. They knew that some goods and services were more likely to be marketable overseas than others. Early research helped them determine which areas of the world would be the best places to start. This, in turn, helped them to further narrow their list of potential products. Also, they were able to assess the financial demands of various approaches to overseas markets. Their financial analysis enabled them to affirm that a franchise would be one of the alternatives with a high profit potential. All of these directions were derived from an initially vague desire to go international. And, as the investors developed their ideas into a clearly defined business purpose, many issues were discovered that were critical to success.

Defining Your Business

A primary concern in defining a mission statement is addressing the question What business are you in? Answering this may seem fairly easy: however, it can be a complex task. Determining the nature of your business should not be strictly tied to the specific product or service you currently produce. Rather, it must be tied to the result of your output -- your social function -- and the competencies you have developed in producing that output.

Management theorist Peter Drucker suggests that if the railroad companies of the early 1900s or the wagon makers of the 1800s had defined their business purpose as that of developing a firm position in the transportation business, rather than limiting themselves strictly to the rail or wagon business, they might still enjoy the market positions they once did (Rue and Byars1983, p. 101). The obvious concern here is to ensure that you do not define your business too narrowly, leaving yourself open to economic changes or competitive challenges that make you vulnerable. The primary reason the service company mentioned earlier (Franchise B) failed was that it lacked a consumer base.These consumers were already being served by the current market.In another example, an entrepreneur developed a device to provide greater security for homes and vehicles. But, by focusing on the product rather than the service it was meant to provide, he failed to consider other services that already provided essentially the same level of protection at lower costs.

Your Firm's Philosophy

Once you have defined your mission statement, the next step is to define the firm's basic philosophy. Such a statement will help explain to your employees and associates how you would like to see the firm operate. Are you a risk taker, or would you prefer to build your business slowly from a solid base? How will you relate to customers, suppliers and competitors? What type of community involvement do you plan for your business, e.g., participation in recycling and volunteer activities? These questions, and many more, need clear answers to help your employees make operational decisions and conduct themselves in a manner consistent with your wishes. Much has been written about this concept in business literature under the term corporate culture. A clear explanation of your business's philosophy in the mission statement will provide a basis for the development of a consistent business culture.

Your Firm's Goals

The next step is to set clear goals to guide and maintain the business on a path consistent with its mission. Daniel Robey provides an excellent list of the key functions of business goals(Robey 1982). To summarize his comments, goals serve to:

1. Justify or legitimize the organization's activities.
2. Focus attention and set constraints for member behavior.
3. Identify the nature of the organization and elicit commitment.
4. Reduce uncertainty by clarifying what the organization is pursuing.
5. Help an organization to learn and adapt by showing discrepancies between goals and actual progress (providing feedback).
6. Serve as a standard of assessment for organization members.
7. Provide a rationale for organization design.

At one time, it was widely assumed that the owner of a company set that firm's goals. Glueck and Jauch refer to this as a trickle-down theory because it was assumed that others in the organization simply accepted these goals. Chester Barnard, believing that it was naive to assume such ready acceptance, suggested that organizational objectives arose from a consensus of the employees (Gleuck and Jauch, pp. 78<196>79). This trickle-up theory, however, is also naive in assuming that an organization is simply the sum of individual perspectives, and that it can achieve direction from an unguided and usually disparate group of people. Modern theories spring from combinations of these two approaches, suggesting goal development is a complex goal-bargaining process that enjoys some advantages of both basic theories.

Bargaining, while seeming a rather negative and poorly developed goal-setting approach, has the advantage of involving most, if not all, employees in the process. As a result, it is more likely that key concerns, internal as well as external, will be taken into account. By involving employees, you improve their understanding of and commitment to the firm.

Pierce and Robinson captured the complexity of goal setting in this statement:

• Strategic choice is the simultaneous selection of long-range objectives and grand strategy. . . . When strategic planners study their opportunities, they try to determine which are most likely to result in achieving various long-range objectives. Almost simultaneously, they try to forecast whether an available grand strategy can take advantage of preferred opportunities so that the tentative objectives can be met. In essence then, three distinct but highly interdependent choices are being made at one time. Usually several triads or sets of possible decisions are considered (Pierce and Robinson 1985, p. 231).

To improve the structure of this strategic approach, most experts suggest that a repetitive method be used in developing goals.

This begins with the owner and perhaps a few key employees agreeing on a long-term direction for the business and suggesting major goals in line with this direction. Then, other employees are asked to suggest specific objectives, which are then reviewed before being implemented. Goals become the shared purposes of the owner and employees and thus, it is much easier to get the support of employees and their clear understanding of what needs to be accomplished.

Goals are defined as broad, ideal conditions. A possible goal could be To become the leading small-package delivery service in the Kansas City metropolitan area. In defining goals it is important to understand (1) how the goal was derived and (2) how it provides guidance.