DEVELOPING A STRATEGIC BUSINESS PLAN

Toolbox

Strategic Planning

…is the managerial process of developing and maintaining a strategic fit between the organization's objectives and resources and its changing market opportunities.

Org Objectives Resources

Changing Environment

Strategic Fit

The Role of Strategy

CorporateMission &Objectives

Strategy:•Corporate•Business•Functional

Operating Plans

Vision and Strategy

Sun Tze on Strategy

“Know your enemy, know yourself, and your victory will not be threatened. Know the terrain, know the weather, and your victory will be complete.”

Strategic Marketing

“Marketing Strategy is a series of integrated actions leading to a sustainable competitive advantage.”

John Scully

Corporate MissionBroad purposes of the

organizationGeneral criteria for assessing the

long-term organizational effectiveness

Driven by heritage & environment

Mission statements are increasingly being developed at the SBU level as well

Examples of Corporate Mission

SINGAPORE AIRLINES is engaged in air transportation and related businesses. It operates world-wide as the flag carrier of the Republic of Singapore, aiming to provide services of the highest quality at reasonable prices for customers and a profit for the company

Examples of Corporate Mission (cont’d)

MARRIOTT’S Mission Statement:We are committed to being the best lodging and food service company in the world, by treating employees in ways that create extraordinary customer service and shareholder value

Corporate CultureThe most abstract level of

managerial thinkingHow do you define culture?What is the significance of

culture to an organization?How does marketing affect

culture in the organization?

Corporate Objectives & GoalsAn objective is a long-range

purpose ◦ Not quantified and not limited to a time

period◦ E.g. increasing the return on shareholders’

equity

A goal is a measurable objective of the business◦ Attainable at some specific future date

through planned actions◦ E.g. 10% growth in the next two years

Strategic planning

Goals / Objectives

SWOT Analysis

Strategy

Implementation

Measurement and Evaluation

STRATEGIC PLAN DEVELOPMENT

Industry dynamics and implications

Environmental and internal assessment

Competitive assessment

Internal assessment

• What are the major changes in industry dynamics and resulting opportunities and risks?

• What are your competitive strengths and weaknesses?

• How does your current business emphasis fit with industry opportunity and competitive landscape?

Strategy articulation

Strategic definition and implications

Strategic initiatives

Financial projections

• What strategy will you pursue over the next 3 years?

• What will be the impact of major strategic initiatives?

• What are the expected financial returns of your strategy?

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Risk/contingen-cies & strategic alternatives

• What strategic alternatives have you considered?

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The Usual Business Planning Hierarchy

Vision

Mission

Objectives

Strategies

Tactics

Plans

VisionMissio

nObjectives

Strategies

Tactics

Plans

Objectives

Strategies

Tactics

Plans

Objectives

Strategies

Tactics

Plans

Strategic Planning – Many Sub Plans

Framework of a Successful Organisation

Business Planning and Delivery

Strategic Plan

Business Plan

Sales & Marketing

PlanState Sales Plans

Regional or

Industry Sales Plan

New Information Feed Back

Vision is a Critical Driver To succeed in the

long term, our business needs a vision of how we will change and improve in the future.

“without a vision, the people perish”

 The vision of the business gives its energy. ◦ It helps motivate

us.

◦ It helps set the direction of corporate and marketing strategy.

VISION

Provides future

direction

Expresses a consumer

benefit

Is realisticIs

motivating

Must be fully

communicated

Consistently followed

and measured

Values underpin all we doValues form the foundation of a business’ management style. Values provide the justification of behaviour and, therefore, exert significant

influence on marketing decisions.

 An example is provided by BT Group - defining its values:  BT's activities are underpinned by a set of values that all BT people are

asked to respect:◦ We put customers first

◦ We are professional

◦ We respect each other

◦ We work as one team

◦ We are committed to continuous improvement.

 These are supported by our vision of a communications-rich world - a world in which everyone can benefit from the power of communication skills and technology.

 A society in which individuals, organisations and communities have unlimited access to one another and to a world of knowledge, via a multiplicity of communications technologies including voice, data, mobile, internet - regardless of nationality, culture, class or education.

 Our job is to facilitate effective communication, irrespective of geography, distance, time or complexity.

Source: BT Group plc website

Has the Company got a strong Clear Mission?

The Business Mission is important to our sales & marketing planning

It provides an outline of how the marketing plan should seek to fulfil the mission

It provides a means of evaluating and screening the marketing plan; are marketing decisions consistent with the mission?

It provides an incentive to implement the marketing plan

PURPOSE – why the business

exists

VALUES & CULTURE –

what management

believes in

STANDARDS & BEHAVIOUR – the rules that guide how we

operate

STRATEGY & SCOPE – what business are

we in and how?

"Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations".

Strategic Audit - ensuring that the Company resources and competencies are understood and evaluated

Resource Audit

Value Chain Analysis

Core Competence Analysis

Performance Analysis

Portfolio Analysis

SWOT / PEST Analysis

Need to work within Company Resources & Constraints

Financial

• Existing Funds• New Funds

Physical

• Production• Marketing• Sales• R&D & Technical• Information Technology

Human

• Existing Staff• Future Staff Requirements• Training & Development

Intangible

• Goodwill• Reputation• Brands• Intellectual Property

Objectives - Corporate & Functional

Corporate These are objectives that concern the business or organisation as a whole

• Examples might include:• We aim for a return on investment of at

least 15%• We aim to achieve an operating profit of

over $10 million on sales of at least $100 million

• We aim to increase earnings per share by at least 10% every year for the foreseeable future

Functional Specific objectives for

sales & marketing activities

•Examples might include:•We aim to build customer database of at least 250,000 households within the next 12 months•We aim to achieve a market share of 10%•We aim to achieve 75% customer awareness of our brand in our target markets •We aim to sell $2m of xyz product into ABC market over the next 6 months

Value Chain Analysis Value Chain Analysis describes the activities that take place in a business

and relates them to an analysis of the competitive strength of the business.

Michael Porter suggested that the activities of a business could be grouped under two headings: 1. Primary Activities - those that are directly concerned with creating and

delivering a product (e.g. component assembly); and 2. Support Activities, which whilst they are not directly involved in production,

may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities.

Value Chain Analysis is one way of identifying which activities are best undertaken by our business and which are best provided by others ("outsourced").

Linking Value Chain Analysis to Competitive Advantage What activities a business undertakes is directly linked to achieving

competitive advantage. For example, if we wish to outperform our competitors through

differentiating ourselves through higher quality then we will have to perform our value chain activities better than the opposition.

But if we adopt a strategy based on seeking cost leadership this will require a reduction in the costs associated with the value chain activities, or a reduction in the total amount of resources used.

Primary ActivitiesPrimary value chain activities include:

Primary Activity

Description

Inbound logistics

All those activities concerned with receiving and storing externally sourced materials

Operations The manufacture of products and services - the way in which resource inputs (e.g. materials) are converted to outputs (e.g. products)

Outbound logistics

All those activities associated with getting finished goods and services to buyers

Marketing and sales

Essentially an information activity - informing buyers and consumers about products and services (benefits, use, price etc.)

Service All those activities associated with maintaining product performance after the product has been sold

Support ActivitiesSupport activities include:

Secondary Activity

Description

Procurement This concerns how resources are acquired for a business (e.g. sourcing and negotiating with materials suppliers)

Human Resource Management

Those activities concerned with recruiting, developing, motivating and rewarding the workforce of a business

Technology Development

Activities concerned with managing information processing and the development and protection of "knowledge" in a business

Infrastructure Concerned with a wide range of support systems and functions such as finance, planning, quality control and general senior management

Steps in a Value Chain Analysis

Break down a market / organisation into its key activities

Determine strategies built around focusing on activities where competitive advantage can be sustained

Core competencies Core competencies are those capabilities that are critical to a

business achieving competitive advantage. The starting point for analysing core competencies is recognising

that competition between businesses is as much a race for competence mastery as it is for market position and market power.

Senior management cannot focus on all activities of a business and the competencies required to undertake them.

So the goal is for management to focus attention on competencies that really affect competitive advantage.

Core Competencies are not seen as being fixed. Core Competencies should change in response to changes in the company's environment. They are flexible and evolve over time. As a business evolves and adapts to new circumstances and opportunities, so its Core Competencies will have to adapt and change.

We need to understand what we are good and what makes us better and to hone these advantages and to develop new ones to underpin the business strategy

Identifying Core CompetenciesPrahalad and Hamel suggest three factors to help identify core competencies in any business:

What does the Core Competence Achieve?

Comments

Provides potential access to a wide variety of markets

The key core competencies are those that enable the creation of new products and services.

Makes a significant contribution to the perceived customer benefits of the end product

Core competencies are the skills that enable a business to deliver a fundamental customer benefit - in other words: what is it that causes customers to choose one product over another? To identify core competencies in a particular market, ask questions such as "why is the customer willing to pay more or less for one product or service than another?" "What is a customer actually paying for?

Difficult for competitors to imitate

A core competence should be "competitively unique": In many industries, most skills can be considered a prerequisite for participation and do not provide any significant competitor differentiation. To qualify as "core", a competence should be something that other competitors wish they had within their own business.

What is Competitive Advantage?“Competitive advantage is a

company’s ability to perform in one or more ways that competitors cannot or will not match.”

Philip Kotler

“If you don’t have a competitive advantage, don’t compete.”

Jack Welch, GE

Four Generic Strategies

Cost Leadership

Differentiation

Cost Focus Differentiation

Focus

Scope

BroadTarget

NarrowTarget

Lower Cost Differentiation

Other Characteristics of Competitive AdvantageSubstantiality

◦Is it substantial enough to make a difference?

Sustainability◦Can it be neutralized by competitors

quickly?Ability to be leveraged into

visible business attributes that will influence customers

(Source: Strategic Marketing Management, Aakers)

Seeking Competitive AdvantagesPositions of advantage

◦Superior customer value◦Lower relative total cost

Performance advantages◦Customer satisfaction, Loyalty,

Market Share, ProfitSources of advantages

◦Superior skills & knowledge, Superior resources, Superior business process

WHERE TO COMPETE?

Customers

Channels

Products

Geographic markets

Target customers and segments• Which customers are you trying to target or

attract?• Which are you willing to serve, but will not spend

resources to attract?• Which would you prefer not to serve?

How does the entity reach its target customers• Which distribution

channels will you use?• What customer

segments can they reach?

Geographical scope of business activities• Geographic limits to

the business?• Local, regional, multi-

local, national, international, or global player?

• If local, which localities?

Quality and breadth of the product line• Breadth of the product line?• Quality of the product line?• Product bundles or a series of unrelated

products?