The SWOT analysis model is the oldest strategic planning model of those selected for this discussion. The name SWOT is an acronym from the words Strengths, Weaknesses, Opportunities, and Threats. The relationship that SWOT suggests with goal and strategies is one where the organization must take advantage of the opportunities available to mitigate the possible effects of any possible threats. In most cases, people practicing business find it much easier to focus on opportunities and increased profits than to pay attention to possible problems. Unfortunately, a good strategic plan would have to include possible threats as well as any efforts or tasks that have been identified to help mitigate their effect.
The SWOT summary is very simple and is done using a worksheet. The list may be as long as the user desires so long as all the information pertaining to the organization is included within. The first entry made is the strengths of the business, followed by any opportunities that are perceived. Using the same approach and simple keywords, the next stage of identification of weaknesses and any perceived threats is completed. The strengths that are listed in this worksheet refer to any positive attributes related to the business. Owing to the nature of the business, these may change.
Opportunities go hand in hand with strengths, and together, these constitute possible offensive weapons for growth. In a similar fashion, weaknesses are any negative aspects related to the business that, in the absence of any mitigation, manifest into threats. The presence of weaknesses or threats is not a disadvantage, but the disadvantage comes from the inability to identify and mitigate a potential threat in good time. Some practitioners indicate that after the identification of the SWOT factors, another worksheet detailing the findings should be prepared to elaborate further.
Also, of use in the process of undertaking strategic planning in modern organizations are the process-based models. Such models are designed to measure the intensity of competition within a specific industry. Such a comparison may be accomplished to satisfy two purposes, namely, to assess the attractiveness of the industry to a particular strategic business or to assess the possibility of building a strong competitive position for the business in question. The models in this category assume that specific aspects within the industry determine the expected intensity of business and thus the expected margins. Long-term profitability is a good measure for prospectors in an industry.
One model that is useful in the process-based analysis is the five forces model. The basic principle behind this model is an analysis of the competitive structure in an industry. The process seeks to provide information on why returns are higher in a particular industry when compared with others. The competition within the industry is described using five factors, after which the rate of return is compared with the overall average of all industries. The five factors are; bargaining power of customers, the bargaining power of suppliers, the threat of new entrants into the market, the threat of substitute products, and finally, the rivalry between competitors.
Another process-based model for analysis is the Strategic Groups model. This model is used in instances where the rate of return is not an adequate factor for use in planning. Among the reasons that are likely to make the rate of return inadequate for planning is the fact that, despite a high rate of return within an industry, the variation in returns among competitors is too high. For example, a small factory manufacturing fresh fruit juice may be competing in the same market as giants such as Pepsi or Coca-Cola. The basis behind strategic group models is the assumption that in most industries, competitors can be grouped in a strategic manner based on similarities, differing groups have differing attractiveness, and lastly, differences in profitability can partially be explained by these strategic groups.
The report will also look into a goals-based strategic planning technique. The selected technique in this category is the Rational Planning Model. In summary, this method begins with identifying goals and ends with developing actions that will help achieve those goals. Once the goals have been identified in this approach, the next steps involve developing policies and programs that will translate the goals into action. This method, as the description indicates, is very rigid and makes many assumptions in the course of its execution. For example, as we mentioned in the discussion on SWOT analysis, the environment where a business operates is prone to change based on external factors. Therefore, the strengths and opportunities identified are also likely to change in the event a change in the environment is reported.
However, when the method of strategic planning in use is based on the rational model, it is assumed that the environment is constant, and thus, the actions identified will remain useful in all circumstances. The rational model of strategic planning is very linear in nature. The model can be divided into two main stages, namely, formulation and implementation. The formulation stage is assumed to be the prerogative of senior management. The formulation stage is also considered to be a rational process where the resources available receive plenty of consideration. This model is often best applicable within small organizations where the formulation stage can be conceptualized by the small number at the top of the organization.