A business strategy has five to ten year time window; the five year window is more common. The strategy normally encompasses the entire business which includes the revenue generating and back office components. If the business has multiple business units, each unit should have a strategic plan which must be consistent with the corporate strategic plan. Certain circumstances can require developing a strategic plan for a specific component, e.g., a strategic plan to outsource all of the back office functions.
The strategic business plan is developed using the outputs of a number of assessments. A market assessment provides the size of the total market, and the size of the various market segments. The results of this assessment are used to determine the target market share and the necessary market penetration of the business’s products or services within each segment.
A competitive analysis is done to identify the significant product or service competitors serving the total market and each of the market segments. This analysis includes a comparison of the various products and services in terms of cost, features and ease of new feature development. The competitive analysis also determines the key customer categories and identifies the most important customers within a category. The projection of potential unconventional suppliers is an important piece of the analysis. These unconventional suppliers can rapidly alter the paradigm of the market.
Internal analyzes are necessary for the development of a business strategy. A detailed assessment is needed of the current products and/or services of the business, as well as each work program. This analysis is done at the business unit level for large companies. The assessment summarizes the strengths and weaknesses of each of the products or services. Also, it provides an evaluation the product life cycles and work programs to determine productivity improvements and cost savings opportunities. A summary of the current customer base needs is developed, as well as an assessment of the sales and distribution channels.
The information from the external and internal analyzes is integrated in the business strategy. New market segments or customer categories are identified and quantified in terms of the projected revenues for each year of the plan. New products, services or product features are described with an associated projected annual penetration levels. A time line is set for phasing out certain products or services. Annual targets are established for sales, new customer development, product or service penetration, productivity improvements and cost reduction.