Table 1. Some key differences between Planning and Strategy Development

(1)

Strategic Orientation (SOR)

www.tacso.orgThis material has been developed by MDF

Strategic Orientation (SOR)

1. Introduction and concepts

Strategy development and planning are closely related. Both are concerned with the future activities of a project or organisation. Where planning is meant to identify concrete activities, strategy development is more concerned with the future direction, rather than with concrete objectives and activities. A strategy is a translation of the organisations’

mission into aims, and provides ideas how these aims could be pursued. As there may be various ways, depending on the environment, strategy development provides a choice among alternatives. Planning is then the concrete translation of the chosen strategy into concrete objectives, activities and related means. Some key differences between planning and strategy development are given in table below:

Table 1. Some key differences between Planning and Strategy Development

Strategy development Planning

Searching direction Concrete (direction is given) Innovation (search for new) Rearranging old ideas

Synthesis Analysis

Aims/visions Objectives

Ideas Actions

Long term Short term

Attention to strengths and opportunities Problem solving (weaknesses, threats) Expansion/forward orientation/anticipation Consolidations/past - present orientation

prediction/reaction Allowing intuition, including soft

information

Rational, using hard information

Strategic Orientation (SOR) is a specific method to develop strategies. It is a method based on the analysis of strengths, weaknesses, opportunities and threats (SWOT). It generates a number of realistic alternatives and provides a prioritisation.

The SWOT framework has been developed as a simple tool for analysis within a strategic planning process. However, a SWOT analysis is never the first nor the last step, but has its designated place within the cycle of analysis, planning and evaluation. The SWOT analysis combines an internal analysis of a project (Strengths and Weaknesses) with an external analysis (Opportunities and Threats). It therefore has to be based on a sound knowledge of the present factors and actors in the working environment, as well as on a sound analysis of the internal resources and functioning of the organisation. In other words - as prerequisite to do a SWOT analysis - the environment needs to be scanned and the institutional setting needs to be analysed in order to identify opportunities and threats, while simultaneously the internal organisation needs to be analysed to identify its strengths and weaknesses. Various ID/OS instruments can be used in the process.

The figure below shows the position of SWOT and Strategic Orientation in relation to different ID/OS tools and concepts within the planning cycle.

(2)

Strategic Orientation (SOR)

Figure 1. Place of SWOT and Strategic Orientation in Strategic Planning

Mission/

Objectives

Environmental Scan

Insitutional Setting

Integrated Organisation

Model

Opportunies

& Threats

Strengths &

Weaknesses Alternative

Strategies

Strategic Plan

(Action) Planning

Implementation Monitoring

In-depth analysis of strategically important

strengths/

weaknesses

Strategic Orientation SW

OT Strategic Planning:

from SWOT to Action Plan

e

Identification

Formulation Appraisal

Financing

Implementation Evaluation

It follows that strategic orientation can be used:

 as a basis for a strategic plan including objectives, activities and means;

 to identify a direction for further analysis and investigation of major strengths and weaknesses, necessary to seize an opportunity or to reduce a threat.

2. The SWOT analysis

The SWOT analysis consists of two parts: The external analysis of the environment to identify opportunities and threats, and the internal analysis of the organisation to identify the existing strengths and weaknesses.

2.1 External analysis of opportunities and threats

The external analysis is described in a dynamic sense taking into account the actual situation (existing threats, non-exploited opportunities) as well as possible trends and developments. However, in order to include them in the analysis, they have to be realistic with clear indications and without major speculations. Moreover, the effect on the

performance of the organisation should be substantial.

An opportunity can be defined as an external fact or development that, if taken advantage

(3)

Strategic Orientation (SOR)

Opportunities for development organisations may exist or arise in the event of:

 gaps in the service/product delivery to the target group (non-existence of certain goods or services, or non-availability in certain locations);

 favourable trends (increase in incomes, growth of urban population with specific needs for more sophisticated products;

 weaknesses shown by other development organisations (low quality, high costs);

 better access to new methodologies/technologies;

 potential for improved cooperation.

In relation to target group oriented opportunities the following table can be considered:

Table 2. Opportunities related to products/services and target groups

Present products/services New products/services present target groups project intensification product/service

development

new target groups project replication project diversification

A threat can be defined as an external fact or development that has or can have a substantial negative effect on an organisation’s performance.

Threats are challenges posed by unfavourable trends or developments in the environment that will lead to the erosion of the organisation's position, if no corrective action is taken.

Threats to development projects/organisations can be found in for example:

 other projects/organisations coming in with similar products/services

 social, economic and cultural development affecting the direct needs of target groups

 collaborators changing their strategy, activities and target groups

 diminishing capability of collaborators (e.g. diminishing implementing capacity)

 changes in donor policies

 changes in availability of resources (man power, inputs, etc.)

 changes in government policies and regulations

Opportunities and threats can be identified in a number of ways. Instruments that can be useful for identification of opportunities and threats are:

 institutiogramme

 network matrices

 environmental scan

 problem tree

(4)

Strategic Orientation (SOR)

Essential in whether or not to include a factor in the analysis is:

 the relevance of the factor for the performance of the project

 the probability that the fact/development is or will become true

 the influence the project has to address the factor

2.2 Internal analysis

The internal situation is discussed on the basis of the existing situation and explores existing strengths and weaknesses and not future ones. An organisation’s strengths and weaknesses are an organisation’s internal critical factors that determine its performance.

A strength is therefore defined as an internal characteristic that contributes substantially to the realisation of the organisation’s mission. A strength is any existing internal asset (management, staff capacity/motivation, knowledge, resources, business links, etc.) which will help to exploit opportunities (or to meet demands) and to fight off threats.

A weakness is an internal characteristic that negatively and substantially influences the functioning of the organisation. Weaknesses are internal conditions that erode the

organisation’s position, hamper cooperation with others or obstruct the exploitation of opportunities.

To identify strengths and weaknesses systematically, the following tools may be useful:

 IOM (balance between the components (outputs, inputs, structure, systems, staff, etc.)

 criteria for judgement (suitability, legitimacy, effectiveness, continuity, sustainability, flexibility, efficiency)

 process analysis

 problem tree

3. Strategic Orientation: the process

3.1 Introduction to Strategic Orientation

Identifying strengths, weaknesses, opportunities and threats is not enough. Depending on their joint pattern strategic choices have to be made. Strategic Orientation is a way to combine/match strengths, weaknesses, opportunities and threats in order to arrive at a number of strategic options from which a choice can be made.

3.2 Steps in strategic orientation

Strategic Orientation can be done individually, but it is much more effective when carried out in a participatory exercise involving all major stakeholders of the project/organisation.

The strategy’s rational and consequences can then be understood and accepted by all decision-makers and field workers. The proposed procedure therefore aims at reaching

(5)

Strategic Orientation (SOR)

1. Define the entity or problem area

2. Identification of strengths, weaknesses, opportunities and threats from internal analysis: strengths and weaknesses

external analysis: opportunities and threats based on joint discussion or brainstorm 3. Developing strategic options

For each opportunity and each threat generate concrete strategic options (concrete objectives/aims) that would make advantage of this opportunity or that would reduce the threat.

4. Select the 4-5 best options

Method 1: develop one or more criteria to select the best options and apply the criteria to the options. Often criteria will follow from a basic question;

Method 2: select the 5 best options using consensus or using voting by participants.

5. Matching the strategic options with strengths and weaknesses

Use the Strategic Orientation Matrix. Identify for each of the options which strengths can be used and which weaknesses should be reduced to be able to realise this option.

6. Formulate tentative strategies

Select now the 2 or 3 options that have the most strengths and relatively few weaknesses;

Formulate major tentative strategies for these options.

7. Follow-up

Identify areas for further investigation (e.g. further analysis of the cost-effectiveness of the tentative strategies formulated);

It is often possible to continue with the formulation of a project plan based on the strategies identified.

3.3 Limitations

The strength of the above-described model is that it is logical approach to identify major strategic choices. When used in a participatory way, it assists in generating consensus among the stakeholders, providing a good basis for implementation of the project plan.

However, the adequacy of the strategic choices depends on the adequacy of the strengths, weaknesses, opportunities and threats identified in the analysis phase and the ability of participants to draw relations between the strategic options and the strengths and

weaknesses. It requires good knowledge of the situation to develop an adequate project plan from the strategies formulated.

(6)

Strategic Orientation (SOR)

Annex 1: Example Strategic Orientation

ISPA

Institutional Strengthening of Private Agriculture - Romania

Step 1. Define Entity / Basic Question Basic Question:

How can ISPA develop into a financially sustainable farmers' organisation while delivering substantial and relevant services to its members?

Step 2. Identification of major Strengths, Weaknesses, Opportunities and Threats

Strengths

 Flexibility to start new (related) activities

 ISPA has good image

 ISPA offers quality

 Quality related payment (milk, etc.)

 Unique service package

Weaknesses

 Scattered locations of centres

 Dependency on small number of processors

 High operating costs

 Weak planning & task division

 Limited management capacity

Opportunities

 High demand for input supply centres

 New/other clients for potatoes and milk

 Access to cheese processing expertise & funds

 farmers interest in ISPA activities

Threats

 Monopoly position of LACTIS (dairy company)

 Non payment of clients

 Still weak relations with farmers

 Uncertain access to finance extension activities

 Resistance of “elephants”

(7)

Strategic Orientation (SOR)

Step 3+4. Develop Strategic Options + select the best options

Major opportunity/threat Major Strategic Options Effect on sustainability High demand for input supply

centres

Increase sales Input supply centres/establish new centres

High New/other clients for potatoes and

milk

Increase purchase & sales of potatoes.

Increase milk collection

High

Access to cheese processing expertise & funds.

Monopoly position of LACTIS (dairy company)

Establish own milk processing unit High

Non payment of clients Improve contracts + more strict follow up

High Still weak relations with farmers.

Farmers interest in ISPA activities

Increase membership promotion &

activities.

High Uncertain access to finance

extension activities

Survey on sources Medium

Resistance of “elephants” Use government relations Low

5. Matching Strategic Options with Strengths and Weaknesses

Strategic Strategic options

Orientation Matrix Strengths

Expand input supply

centres

Expand potato sales &

milk collection

Establish own milk processing

unit

Increase member-

ship promotion

& activities

Improve contracts

+ follow up

1. Flexibility to start new (related) activities

++ +

2. ISPA has good image + ++ ++ + +

3. ISPA offers quality + +++ +

4. Quality related payment (milk, etc.)

+ ++ +++

5. Unique service package ++ ++

6 6 5 6 2

Weaknesses

1. Scattered locations of centres

+ + +

2. Dependency on small number of processors

++

3. High operating costs. + +

4. Weak planning & task division.

+ + + +

5. Limited management capacity

++ + +++ + +

Total 5 4 5 2 3

Difference S-W 1 2 0 4 -1

+ = using this strength/ removing this weakness has some effect on this strategic option ++ = using this strength/ removing this weakness has substantial effect on this strategic options +++ = using this strength/ removing this weakness has a major effect on this strategic option

(8)

Strategic Orientation (SOR)

6. Formulate Tentative Strategies 1. Increase Membership promotion

 using quality related payment and

 unique service package

 while improving planning and monitoring

2. Expand Potato sales and milk collection

 using ISPA’s good image

 and emphasising quality

 while reducing operating costs

 and improving planning and monitoring

3. Expand Input supply centres

 using the flexibility to start new activities

 and ISPA unique service package (to attract customers)

 while reducing operating costs

 and improving planning and monitoring

(9)

Strategic Orientation (SOR)

Step 7. Logical Framework for implementation

Intervention Logic

Indicators Sources of verification Assumptions

Overall Objective

Improved income agricultural producers

Difference between market price and ISPA price to Agr. Producers Project

Purpose

To improve support to agricultural producers

Purchases from Agr. Prod.

Intermediate Results

1. Input supply centres established

2. Potato marketing and milk collection expanded

3. Financial position strengthened

4. Membership of Agricultural Producers strengthened

Indicators of results No of centres established No of customers per centre Sales

Gross result Net result

Return on investment

No of centres established No of customers per centre Sales

Gross result Net result

Return on investment (ROI)

Net result

Net result econ. activities Liquidity

ROI of economic activities Existence of relations with potential donors.

No of members.

No of locations No of members per location

Number of services used by members

Source of verification

Activities 1.1 To analyse fin.

feasibility input supply centres

2.1. Establish new milk collection centres (5)

3.1 Organise the accounting system

4.1. Improve use of payment days for

information and extension

1.2 To develop logistic system input supply centres

2.2. Identify more reliable partners

3.2 Improve regular financial analysis and planning and improve monitoring.

4.2 Improve information at input supply centres

1.3. To develop administr.

system input supply

2.3. Improve delivery and transport planning

3.3 Assess reduction of administration costs and review costs/hour

4.3 Improve extension and mobilisation capacity

1.4 2.4 Improve contracts and

follow up on contracts

3.4 Identify and assess new economic activities

4.4 Re-define relations with other extension agencies

1.5 2.5 3.5. Identify financial

sources for members services

4.5 Develop relation with cattle breeders

organisation