Environmental Analysis and Strategic Assumptions

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What are an organization's strategic assumptions?

Every strategy is based on underlying strategic assumptions. As such, it is impossible for any CEO or executive team to make decisions that are not based on their hunch, gut feelings, some point of view, or data of how they believe things will 'unfold' based on the industry's happenings (TDG, 2012). In the field of strategy, the admission that assumptions are being made in the preparation of strategic plans first needs to be acknowledged, and discussion surrounding such assumptions must be viewed as key elements and the responsibility of the executives and management teams that created the strategy. This way, CEOs, CFO's consultants, Chief Strategy Officers (CSOs), or employees in the Strategy Management Office can be forced to raise their own performance standards and the rigor of the strategy process to standards that can be compared to science, economics and finance, where the publication and debate of assumptions are the norm(Hollingworth, 2008).

Furthermore, doing so can pave the way for exceutives to gain greater credibility and 'clout' and can help to build a stronger voice on their teams. Additionally, this could help provide them with the opportunity to increase their contributions in decipehering the direction and forecasting the futur performance of the organization (Hollingworth, 2008). An organization's business plan will also reflect the difficult as well as the easy choices made by management during the strategic planning process (Hollingworth, 2008). It is important to note that identification and discussion of key issues are not necessarily intended to generate right or wrong "answers" rather, they should represent choices and shared points-of-view about what the team believes will happen. Therefore, together they must form a realistic number and/or set of strategic assumptions upon which management intends to build its strategic plan and business going forward (Hollingworth, 2008).

As all markets and organizations are different and unique in their own ways, there is really no universal set of strategic questions that must be posed when assembling a business plan, and so one of the major challenges in strategic planning is the ability to identify the major questions an organization should and needs to address. Similarly, there is no universal set of strategic assumptions that must absolutely be promoted and addressed in every organization's strategic plan (Hollingworth, 2008). There are, however, generic areas where strategic assumptions generally must be made including but not limited to the following examples:

Please see the attached document for the examples.

An example of a very powerful strategic assumption is: In 2002, the Canadian dollar was worth approximately US $0.65. To this end, a shared strategic assumption of almost all Canadian manufacturers was that the parity between the Canadian/US dollar was simply unthinkable. In 2008, how have their beliefs changed; and what is their strategic assumption of exchange rates today in 2013? This is a crucial assumption that will form the foundation of their production strategy for the next five years (Hollingworth, 2008).

Overall, the contents of an organization's business plan often reflect the difficult choices made by management during the strategic planning process. ...