Strategic Planning for Family Businesses: Using SWOT, PESTLE, and Ansoff
As family business management consultants, developing strategy is a core piece of the work we do at the Alliance.
The simplest way to think about strategy is to answer this question: “How are you going to attack the market?”
- How are you going to compete?
- How are you going to grow value?
- How are you going to add value?
The answers to these questions are best answered after conducting a thorough analysis of the business.
We recommend doing this collaboratively with a group of people from various functions and diverse levels of the organization to gain better insights.
By taking a structured approach to analysis, you uncover important factors that might otherwise be overlooked.
We have a collection of tools that we use to help our clients develop one-page strategic plans, today I am sharing 3 of them:
- SWOT Analysis: examining the strengths, weaknesses, opportunities, and threats that impact business performance.
- PESTLE Analysis: looking at the external factors that could present risks to your business.
- Ansoff Matrix: identifying growth opportunities.
Let’s dive in.
SWOT: Internal and External Factors that Impact Business Performance
A SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is a tool used to evaluate the internal and external factors that impact a business’s performance.
Strengths and weaknesses are internal factors that are controllable, while opportunities and threats are external factors that are not within the business’s control.
We use the SWOT analysis to help guide our creation of the one-page strategic plan.
By analyzing the internal strengths and weaknesses of the business, we can identify what the business does well and where it needs to improve.
We can then use this information to develop strategies to capitalize on strengths and improve weaknesses.
Similarly, analyzing external opportunities and threats helps us identify potential market opportunities and risks to the business, which can guide strategy development to take advantage of opportunities and mitigate threats.
The benefits of conducting a SWOT analysis include:
- Improved decision-making: make informed decisions by providing a comprehensive overview of their strengths, weaknesses, opportunities, and threats.
- Better resource allocation: prioritize resources and investments based on the areas of the business that require the most attention.
- Increased competitiveness: identify areas where you can differentiate from competitors and gain a competitive advantage.
PESTLE Analysis: External Factors that may Create Risks for your Family Business
A PESTLE analysis considers political, economic, social, technological, legal, and environmental factors that may affect the business.
We primarily use PESTLE for risk management. By looking at outside factors that may impact the business, we can identify risks and address them in our strategic plan.
- Political factors – government regulations and policies that may present a risk for a family business’s operations and profitability.
- Economic factors – economic conditions of the country, such as inflation rates, exchange rates, and interest rates.
- Social factors – cultural and demographic trends, consumer behaviors, and societal values that may impact the business’s demand for goods or services.
- Technological factors – advancements in technology and their impact on the business.
- Legal factors – the laws and regulations that impact the business, such as employment law or data privacy regulations.
- Environmental factors – the impact of environmental issues on the business, such as climate change or sustainability.
By analyzing these factors, the family business can anticipate potential risks, challenges, and opportunities and adapt their strategy accordingly.
For example, a family business in the transportation industry may consider the impact of government regulations on fuel emissions, the growth of electric cars, and the changing preferences of consumers for sustainable transportation options when developing their strategic plan.
The benefits of conducting a PESTLE analysis include:
- Anticipation of potential risks: anticipate potential challenges and risks that may impact their business in the future.
- Awareness of external factors: become more aware of external factors that may impact their business, such as changes in government policies, economic conditions, or social trends.
- Identification of new opportunities: identify new markets, emerging technologies, or changing customer preferences that may present growth opportunities for their business.
Ansoff Matrix: Identify Growth Opportunities
The Ansoff matrix is a strategic tool used to assess opportunities for business growth by analyzing four key growth strategies: market penetration, market development, product development, and diversification.
Market penetration: increasing sales of existing products or services to current customers in the current market.
Market development: expanding the business’s existing products or services to new markets.
Product development: introducing new products or services to the existing market.
Diversification: introducing new products or services to new markets.
By using an Ansoff Matrix to analyze the family business’s current product offerings and markets, the family can identify which growth strategy is most appropriate for their business.
For example, a family business in the retail industry with a strong market share in their current market may use a market development strategy to expand into new geographic markets. Alternatively, a family business in the technology industry with an established product line may use a product development strategy to introduce new products to its existing customer base.
The benefits of the Ansoff Matrix include:
- Clear direction for growth: by identifying the most appropriate growth strategy based on their current products and markets.
- Increased profitability: by highlighting new opportunities for growth that can lead to increased revenue and profitability.
- Better resource allocation: by prioritizing growth opportunities that align with their strategic objectives.
Overall, conducting these three analyses can provide family businesses with a holistic view of their business, the external environment, and growth opportunities.
By leveraging the insights gained from these analyses, family businesses can develop a more effective strategic plan and position themselves for long-term success.
If you’d like some expert help developing a strategic plan for your family business, book a call with one of our advisors: book a call.
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