Business planning require making fundamental decisions about where the business is moving and how it will develop in the future. What do you personally want to achieve? What long-term objectives do you have for the business? What options are available to achieve the objectives?
Which option is best for my business?
Finding the answer to this question requires a systematic evaluation of the strategic options, in the context of the strategic analysis of the organization.
Three main factors you should consider:
Suitability: to what extent the strategic options are compatible with the strategic analysis of the organization, its operating environment, and its strengths and weaknesses. Would a particular option make full use of the organization’s strengths whilst at the same time avoiding any adverse impact by its weaknesses or any foreseeable external factors such as changes in legislation or government policy?
Feasibility: this examines how and whether or not the strategy might work in practice. For example, an option to expand into export markets might not be feasible if the business had no knowledge or experience of exporting and lacked the economies of scale to compete on price against the local suppliers in those markets. Similarly, the option to grow market share by acquiring another business would be totally unrealistic if the business had little or no spare capital and borrowing capacity to finance the acquisition. In the case of the small firm, the feasibility of any option in terms of the firm’s capacity and resources will always be the limiting factor.
Acceptability: how acceptable and compatible it will be relative to the needs and objectives of the stakeholders in the business. An option that appeals to one stakeholder may be totally unacceptable to another. This is a situation that can frequently arise in partnerships and small family firms, when one partner wants to grow and expand whilst another wants to avoid risk and just consolidate the business. A similar situation might be where one director wants to focus on market penetration for current products or services, and another wants to diversify the business. In an ideal world, the business might be able to follow both strategies, but in small firms the financial resources rarely permit such luxuries.
In order to evaluate the various options effectively, you must ask a range of questions further:
Which of the selected options are most compatible with the strengths and weaknesses that were identified in the strategic analysis of the business? Do they build on the strengths? Do they avoid or overcome the weaknesses?
How do the options relate to the opportunities and threats that have been identified, and do they take full advantage of those opportunities? Are they robust enough to withstand any obvious threats?
What external factors (changes in government policy, legislation, economic trends, etc.) could influence the various options, and would the effects of these factors be positive or negative?
Are the options compatible with the objectives of the owners of the business, and if this is not the case, are the differences minor, substantial or critical?
Are there any factors within the options which might be regarded as unacceptable by other stakeholders, such as suppliers, financiers or bankers?
What risks are associated with each of the options, and are these regarded as acceptable by the owners and stake-holders involved in the business?
Is the business capable of accommodating or implementing any changes implicit in the various options?
What are the current limiting factors that might inhibit the options? For example, financial resources, borrowing capacity, physical space, management skills, staff availability and skills, market size and accessibility. How might these limiting factors be overcome?
Given current resources, which of the proposed options could realistically be achieved by the business in the next three to five years?
What returns (in terms of increased revenue, cost savings, improved profits, etc.) might we expect from the respective options, and what levels of investment would be required to achieve those returns?
Which option is best for my business?
Finding the answer to this question requires a systematic evaluation of the strategic options, in the context of the strategic analysis of the organization.
Three main factors you should consider:
Suitability: to what extent the strategic options are compatible with the strategic analysis of the organization, its operating environment, and its strengths and weaknesses. Would a particular option make full use of the organization’s strengths whilst at the same time avoiding any adverse impact by its weaknesses or any foreseeable external factors such as changes in legislation or government policy?
Feasibility: this examines how and whether or not the strategy might work in practice. For example, an option to expand into export markets might not be feasible if the business had no knowledge or experience of exporting and lacked the economies of scale to compete on price against the local suppliers in those markets. Similarly, the option to grow market share by acquiring another business would be totally unrealistic if the business had little or no spare capital and borrowing capacity to finance the acquisition. In the case of the small firm, the feasibility of any option in terms of the firm’s capacity and resources will always be the limiting factor.
Acceptability: how acceptable and compatible it will be relative to the needs and objectives of the stakeholders in the business. An option that appeals to one stakeholder may be totally unacceptable to another. This is a situation that can frequently arise in partnerships and small family firms, when one partner wants to grow and expand whilst another wants to avoid risk and just consolidate the business. A similar situation might be where one director wants to focus on market penetration for current products or services, and another wants to diversify the business. In an ideal world, the business might be able to follow both strategies, but in small firms the financial resources rarely permit such luxuries.
In order to evaluate the various options effectively, you must ask a range of questions further:
Which of the selected options are most compatible with the strengths and weaknesses that were identified in the strategic analysis of the business? Do they build on the strengths? Do they avoid or overcome the weaknesses?
How do the options relate to the opportunities and threats that have been identified, and do they take full advantage of those opportunities? Are they robust enough to withstand any obvious threats?
What external factors (changes in government policy, legislation, economic trends, etc.) could influence the various options, and would the effects of these factors be positive or negative?
Are the options compatible with the objectives of the owners of the business, and if this is not the case, are the differences minor, substantial or critical?
Are there any factors within the options which might be regarded as unacceptable by other stakeholders, such as suppliers, financiers or bankers?
What risks are associated with each of the options, and are these regarded as acceptable by the owners and stake-holders involved in the business?
Is the business capable of accommodating or implementing any changes implicit in the various options?
What are the current limiting factors that might inhibit the options? For example, financial resources, borrowing capacity, physical space, management skills, staff availability and skills, market size and accessibility. How might these limiting factors be overcome?
Given current resources, which of the proposed options could realistically be achieved by the business in the next three to five years?
What returns (in terms of increased revenue, cost savings, improved profits, etc.) might we expect from the respective options, and what levels of investment would be required to achieve those returns?
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