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What are major strategic planning tools?

by Dan Power

People will disagree about what tools are most useful, but the following are familiar and commonly discussed:

1) SWOT Analysis. An analysis of internal characteristics of a firm leads to categorizing them as strengths, weaknesses or basicf business requirements. Opportunities and threats are the potential interaction of external factors with internal characteristics to harm or help the firm.

2) Porterís Five Competitive Forces Analysis. Michael Porter developed a model that identifies five forces that impact profitability for an industry. In nonprofit environments the forces indicate the chances of success for industry participants. The forces include: Threat of Entry, Treat of Substitutes, Bargaining Power of Buyers, Bargaining Power of Suppliers and Rivalry among Industry participants.

3) PEST Analysis. This simple tools helps strategists understand the Political/Legal, Economic, Socio-Cultural and Technological environment of an organization.

4) Critical Success Factor (CSF) Analysis. CSF are essential areas of activity that must be performed well if an organization is to achieve the mission, objectives or goals.

5) Marketing Mix Analysis. The 4Ps makeup the marketing mix: product, place, price and promotion.

6) Product/Industry Life Cycle Analysis. Stage of growth and decline can be categorized as emerging, rapid expansion, transitioning to maturity, mature and declining. These categories suggest strategic actions that seem to hold in varying industries and for diverse products. In the emerging stage there are alternative product designs and firms are establishing the range and boundaries of the industry itself; in rapid expansion/innovation phase product innovation declines, process innovation begins and a "dominant design" is established; in the transition, shakeout phase economies of scale are achieved, forcing smaller players to be acquired or exit altogether. Barriers to entry become higher, as consolidation occurs; at maturity growth is no longer the main focus, market share and cash flow become the primary goals of the companies left in the industry; finally in decline revenues are declining; the industry as a whole may become obsdolete.




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