Plans and ideas that are organised by the business leaders for their organisation’s future period is strategic plan. Business leaders should accept that yesterday’s success does not ensure organisation’s future success.
In a humorous vein, V. in the book “The Mafia Manager” puts it this way: “If you don’t know where you are going, you won’t get there or anyplace else.” (Ref-1)
Systematic process of envisioning a desired future, and translating this vision into broadly defined goals or objectives and a sequence of steps to achieve them. (Ref-2)
IMPORTANCE OF STRATEGIC PLANNING.
In order to make your organisation successful, you need a Roadmap for Success. It gives a direction to the organisation, where to go and how to go. It gives direction to the employees, how to achieve the targets.
Goal Congruence, when the objectives of all employees are coincides with the objectives of the organisation.
Strategic planning also creates Motivation in employees.
While making strategic plan we do keep in mind some things like our customers approach, their mind, what they think about our organisation and their feedback. In this way we can understand our customers and keep in mind them while making our business strategies.
We also take feedback of our employees. It makes the communication stronger between the strategic level and operational level. It also motivates the employees and let them feel they are the part of organisation. After all these are the employees who will complete the organisation’s plans and goals and achievements.
Basically making a strategic plan is not that difficult. It only needs some feedback from customers and employees and some thoughts, but organisation needs their employees for long run and they want their motivation and some customer’s needs also. Strategic planning Creates Vision and Direction that is simple and clear.
DIFFERENT STAGES IN THE DEVELOPMENT OF A STRATEGIC PLAN:
The process of determining a company’s long-term goals and then identifying the best approach for achieving those goals. (Ref-3)
STAGES OF A STRATEGIC PLAN.
There are four main stages of strategic plan!
A statement which shows the purpose of a company or organisation. It is a formal, concise and written statement. It explains the reasons of the existence of the company.
The Mission statement should point out its overall goals, guide about the actions of the company, shows the direction of the company, and provide the decision making process. It provides a framework by which the company formulate its strategies.
Mission statement of a company often contains the following!
Aim of the company.
The company’s primary stakeholders.
Responsibilities of the company.
Company’s services and products.
A mission statement can be use as a tool to resolve the matters between company’s stakeholders. Company’s stakeholders include employees (managers and executives), board of directors, stockholders, customers, distributers, suppliers, governments, NGO’s, unions, creditors, competitors and general public as well.
Here we develop a long term measureable and specific objectives to deal with our company’s most critical issues, that’s what we call it strategic objectives. Strategic objectives are normally of timeframe of 3 to 5 years or more. They could be 8 to 12 months but it does not mean they are non strategic objectives. Typically, but not always, strategic plans have multiyear timeframes accordance of achievements and multi functional in its nature.
DEVELOPMENT OF STRATEGIC OBJECTIVES.
While making strategic planning, we align the critical issues with reference which we identified. Start from the most critical issues and discuss ways to address it. Make the ideas positive in concept and wording. Focus on the long term goals, not on the short term objectives and problems.
After you have completed the prioritization then start on the issues and try to make them easy and workable for the staff and employees.
EXAMPLES OF STRATEGIC OBJECTIVES.
In making some sense that how strategic objectives look like in real company’s here are some examples!
Here we see the growth of the company. Are our long term plans improving the growth of our company?
We have made our work place injury free.
We have a complete management team and we can meet our strategic objectives.
We have reduced our employee turnover ratio. And our employees are well motivated.
Our product quality is error free and excellent.
Strategic goals can be define as, what the company wants and expecting and trying for as a whole after some planning and making some objectives. Goals could be a successful company in any field or general.
Goals could be long term and short term. Goals could be a length of six months, one year, 3 years and ten years. Some company’s set long term goals before the short term goals, as achieving step by step short term goals leading to achieve long term goals more easily.
There are 2 types of goals!
Result oriented goals are, we will increase our market price, return on capital investment, share price etc.
Profit oriented goals are how many new products we will introduce in the market this year, how many new plants we have installed, reduce employment turnover ratio.
Well in both cases goals are measurable.
When we set our goals and objectives in order to attain out missions then we make an action plan by which we can achieve our objectives and goals. Without the action plan it’s impossible to implement a plan and measure its ratio of success.
First we see what our action plans are and how we can put them together in getting desired results. To do this all we need a team got manager and team members. They should assign their work and manager supervises them. Participation which leads to commitment is the big advantage of team work. (Ref-4)
SWOT analysis is a strategic planning method which is used to evaluate the organisations strengths, weaknesses, opportunities and threats.
SWOT ANALYSIS OF next plc.
Next is a UK based retailer offering exciting, beautifully designed, excellent quality fashion and accessories for men, women and children together with a full range of home wares. Next distributes through three main channels.
Next retail, it’s a chain, got more than 500 stores in UK and Eire;
Next Directory, a home shopping catalogue and a website with more than 2 M active customers;
Next International, have more than 180 stores throughout continental Europe, Scandinavia, Japan, India, the middle east and Russia and an international website serving the USA and over 30 other countries worldwide.
The parent company, next plc, registered with London stock exchange and its head office is located in ender by on the outskirts of Leicester, England. It’s a member of the FTSE 100 index. Total revenue of the year ended January 2010 were £3.4 billion with before-tax profits of £505 million.
Basically it’s founded by J Hepworth & Sons with the name of Gentleman’s Tailors in Leeds, England. Hepworth buys a chain of Kendall’s rainwear shops to develop a women ware group of stores called next in 1981. The first women ware store opens in 12th February 1982 and it reaches to 70 around the UK at the end of July.
In 1984 next launches its menswear in august and by December it had 52 menswear stores in UK. In 1987 next launches children ware. In 2010 Next confirmed as Official Clothing and Home ware Supplier to the London 2012 Olympic Games and Paralympics Games.
Next uses SWOT analysis to find out its strengths, major weaknesses, potential opportunities and unaware threats to company. By using SWOT analysis Next Plc can overcome its weaknesses and threats and can get benefit from its strengths and opportunities. Let’s have a look on next’s SWOT analysis below!
Strengths could be the company’s location or its unique marketing expertise.
The main strength of next plc is its holding age group from 20 to 40. Next sells a great variety and quality of adult wears under its named tag. But some of its competitors are not that successful in satisfying its customers in this segment.
Next use to sell its quality and stylish products in reasonable prices with its own tag. As next uses its own name on tags so it reacts quickly in any complain or update and keep on trying to improve its standard and quality and keen to satisfy its customers’ needs. And it got total control on its quality management
Customers concern only with next’s tag on cloths because they understood that cloths selling under next’s tag are of good quality in any aspect.
It got 500 stores in UK and Eire.
Next has a pretty old history and experience in the field of retail and garments.
Next deals with luxury brand named Signature.
Next used to do next day delivery for the orders placed before 5pm from next directory.
Next has to acknowledge its weaknesses in order to improve and manage them. The weaknesses of Next include:
If we see the customer’s trend towards shopping, they are focussing more on internet than to visit stores. By looking at this trend net should focus on e-commerce but if we see the spending of next on this field is just £125000. While its competitors spending more generously like Debenhams invest £5 million on internet technology while M & S has spent £50 million on e-commerce and digital TV. Next should spend reasonable amount to stay in this market.
Next used to do a concentration of similar type of clothing in the retail business. If its competitors hold the market or if the customers changed their minds or if the fashion trend is changed then Next should face very difficulties to stay in market.
Next works in UK so any policy about British pound will affect the Next’s position in market.
Next got 500 stores around UK and Eire. If we see the retail market, we can see that Next can find a suitable space to grow in the market by increasing its number of stores all over the world. It can introduce Next in other countries where they have not approach yet but still there is scope in the market.
Next can gain a wide range of market by reducing its prices to a small extent as its competitors are selling their products at high prices.
Next should invest on e-commerce and digital TV to improve its competitive position in the retail market.
Next should open new stores on new and stylish locations because this is the era of glamour.
Next is the official supplier of 2012 Olympic events. This is great opportunity for next to explore itself as a unique and stylish brand in retail market and make its competitive position more strong.
The biggest threat to Next is the low market growth and strong competition. Some companies in the retail market use very aggressive ways to capture market or maintain their competitive position. Some companies get their products ready from some third world countries with cheaper labour and used to sell their products in the market at less price compared with their competitors.
Next need to work hard to retain its competitive position in market, as there are more competitors in the market. It needs to adjust its prices which are more competitive.
Next needs to satisfy its customers in order to retain them. (ref5)
IMPORTANCE OF PORTER’S INDUSTRY STRUCTURAL ANALYSIS MODEL:
Michael E. Porter of Harvard Business School in 1979 presented a framework for the industry analysis and strategies for business development. He shows that there are five forces which determine the competitive intensity and therefore attractiveness of a market, and here attractiveness means the overall profitability of the industry.
Three of his five forces refer to competition from external sources and the rest are from internal threats.
Porter’s five forces rule is very powerful rule to understand where the potential and power lies in a business market. It can also help to see the company’s strengths and weaknesses in the moving market and how can we overcome our threats to attain and achieve our company’s opportunities. We can use this analysis to identify, whether the market got the potential to be profitable for new product, services or business.
This analysis suggests that managers should focus and understood about the business internet forces and the market competitive situations in order to make affective strategies for business.
PORTER’S FIVE FORCES MODEL.
Threats of new entrants
RIVALRY AMONG EXISTING FIRMS
Bargaining power of buyers Bargaining power of suppliers
SUBSTITUTESThreats of substitute products or services
PORTERS INDUTRY STRUCTURAL ANALYSIS OF Next Plc.
By using Porter’s five forces analysis model we can assess the capabilities and potential of Next Plc in the market. Analysis is as follows!
BARGAINING POWER OF CUSTOMERS (BUYERS).
Under some conditions buyers role in the market varies, depends on the market condition. If there is one buyer in the market and more than two suppliers then buyer fix the price but if there are a lot of buys and one supplier, the situation would be different. If we see the situation of Next in the market, there are some powerful competitors in the market, so Next should be very careful about its policies about prices and quality. Most of the buyers want some bargain on the ticket price and management have to cut prices to avoid losing sales. Sometimes customers assume the price cuts that they are doing lower down their quality. Well if the management cut the price for a customer to retain them but still there is no surety that he will be loyal with Next or who knows what buyer’s choice is? Next also needs to know that its customers have that knowledge that they know what it is selling in the market and why its products are different and of high quality in what aspects.
BARGAINING POWER OF SUPPLIERS.
Suppliers are the inputs in any industry and if the suppliers of raw material, skilled labour of or in any field or services or components, refuse to work with any industry they can easily get their terms like charge high prices for expertise. Well it depends on the market situation as well.
If we see the situation of Next Plc in the market then no supplier can refuse to supply its products or raw materials to Next for some terms or to charge some extra prices, because this market got a lot of suppliers and Next can easily replace its any supplier.
NEW ENTRANTS TO THE INDUSTRY.
The new entrants in the market are a big threat to any industry. Basically Next has no threat from the new companies if they are introducing themselves in the market because it’s very difficult and need a lot of finance and struggle to be competitors of Next. But Next has a threat from existing big brands in the market like Marks and Spencer. If they introduce themselves in the market to capture it then Next would be in a trouble and Next is aware of that. Next also threat of the big brands like Donna Karan and Calvin Klein. If they open their stores in the busy high streets like Ralph Lauren or New Bond Street, it would create trouble for Next to stay in the market, as these companies got a lot of money, powerful market knowledge and power to enter in the clothing industry.
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SUBSTITUTE PRODUCTS OR SERVICES.
The threats of substitutes do not affect Next and this is not a big issue in the clothing industry. Like a pullover could be a substitute for a jacket or a trouser for skirts but next is providing all these items anyway so the threat of substitute to Next is nothing to worry about. But if Next fails to note the customers trends then it would be a problem. As customers see the Next as trendier company in the market and if its products are not that stylish and of not quality of the latest trend then it really disappoint its customers and it would lose them.
INTENSITY OF RIVALRY.
In this part of porter’s analysis, we see the competitive situations of the companies in the market. If we see the situation of Next in context of competition in this market then it’s very hard to survive because the situation is very tough. There are a huge number of retailers in the clothing market in the UK. And Next got threat from its rivals like Marks and Spencer, Zara, Gap etc. Every company needs to attract and hold maximum customers in the market to survive. Customers see the best offers in the market that attracts them so to gain the customers, companies need to cut their prices and focus on their customer care department. If Next wants to gain market share then it needs to take sale from its competitors and it will leads to rivalry. (Ref-6)
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