2. Where do we want to be?

3. How do we get there?

«The «where are we now?» question is answered through the first three steps of the strategy formulation process: (1) perform internal and external environmental analyses, (2) review vision, mission and objectives, and (3) determine SWOT: Strengths, Weaknesses, Opportunities and Threats. SWOT analysis requires managers to be honest, self-disciplined and thorough. Going on to strategy choices without a comprehensive SWOT analysis is risky.» [1]

Strengths and weaknesses come from the internal environment of the firm. Strengths can be exploited, built upon and made key to accomplishment of mission and objectives. Strengths reflect past accomplishments in production, financial, marketing and human resource management. Weaknesses are internal characteristics that have the potential to limit accomplishment of mission and objectives. Weaknesses may be so important that they need to be addressed before any further strategic planning steps are taken.

Opportunities and threats are uncontrollable by management because they are external to the firm. Opportunities provide the firm the possibility of a major improvement. Threats may stand in the way of a firm reaching its mission and objectives.

Organizing

Organizing is establishing the internal organizational structure of the business. The focus is on division, coordination, and control of tasks and the flow of information within the organization. Managers distribute responsibility and authority to job holders in this function of management.

Organizational Structure

Each organization has an organizational structure. By action and/or inaction, managers structure businesses. Ideally, in developing an organizational structure and distributing authority, managers' decisions reflect the mission, objectives, goals and tactics that grew out of the planning function. Specifically, they decide:

1. Division of labor

2. Delegation of authority

3. Departmentation

4. Span of control

5. Coordination

Management must make these decisions in any organization that has more than two people. Small may not be simple.

Organizational structure is particularly important in family businesses where each family member has three hats (multiple roles): family, business and personal. Confusion among these hats complicates organizational structure decisions.

Division of Labor

Division of labor is captured in an organization chart, a pictorial representation of an organization's formal structure. An organization chart is concerned with relationships among tasks and the authority to do the tasks. Eight kinds of relationships can be captured in an organization chart:

1. The division/specialization of labor

2. Relative authority

3. Departmentation

4. Span of control

5. The levels of management

6. Coordination centers

7. Formal communication channels

8. Decision responsibility

To improve organizing managers should listen to the opinion of Bernard L. Erven. «Organization charts have important weaknesses that should be of concern to managers developing and using them:

1. They may imply a formality that doesn't exist.

2. They may be inconsistent with reality.

3. Their usual top down perspective often minimizes the role of customers, front-line managers and employees without management responsibilities.

4. They fail to capture the informal structure and informal communication.

5. They often imply that a pyramidal structure is the best or only way to organize.