Plan Model – Planning School of Strategy Formulation

Various strategy models have been developed over the years to help businesses develop winning business strategies.  The “Planning School of Strategy Formulation” was one of the first strategy approaches developed.  It is a highly structured, rigorous, methodology.

H. Igor Ansoff was the key initial figure that developed the thinking used in this model. His education was in engineering and applied mathematics. He is attributed as being the father of strategic management.

In 1965, Igor published Corporate Strategy which played a major role in contributing to what is referred to as “the planning school” of strategy formulation.  Igor laid out in the  book a formal, scientific, strategic management process that included theories, models, processes, checklists, techniques, etc.

Critics argue that Igor made strategic management too formal, machine like and thus overly bureaucratic. They argued there was no room for creativity in his model.

Igor work was respected deeply and he consulted with hundreds of multinational corporations including, General Electric, Gulf, IBM, Philips, Sterling and Westinghouse.

Ansoff discussed the importance of firms developing strategies that align to their key competencies. To facilitate this process, he outlined four key strategy components:

• Product-market scope: the products and markets the business plans to focus on
• Growth vector: how the firm plans to grow?
• Competitive advantage: the advantages the firm plans to focus on to compete effectively in the market place
• Synergy: how the firm’s core competencies align with the desired plans.

Ansoff discussed the importance of firms developing strategies that align to their key competencies. To facilitate this process, he outlined four key strategy components:

Ansoff describes four growth alternatives:

Market penetration

In this scenario, the business attempts to expand using its existing products and services within its existing markets.  The strategy involves trying to sell more products or services to established customers or by finding new customers within existing markets - primarily through more aggressive promotion and distribution, price reductions, increased support, or through the acquisition of the competition.

Market development

In this scenario, a firm attempts to expand into new markets using its existing offerings.

Product development

In product development strategy model, a company creates new products and services targeted at its existing markets to achieve growth.

Diversification

In a diversification model,  an organization attempts to grow its market share by introducing new offerings in new markets.

Highlights by David Willden