practical strategic planning

Practical Strategic Planning

STRATEGIC BUSINESS SITUATION ANALYSIS

The situation analysis or audit, described as the ‘where are we now’, is the means by which a company can identify its own strengths and weaknesses as they relate to external opportunities and threats. It is thus a way of helping management to select a position in that environment based on known facts. The external environment of a company covers many aspects. It is suggested that the environment covers two main areas: the Macro-environment and the Micro-environment. The Macro environment consists of forces such as social, cultural, legal, economic, political and technological. Within this factors such as demographics, green issues and larger societal and environmental forces are included. The Micro-environment includes other environmental constraints such as the structure of the market, the suppliers, customers, trends of the market, and competition. Equally important is the internal environment incorporating the examination of the company's Marketing mix (product, price, place, promotion) and service mix (people, process management, physical evidence). An analysis of the internal environment also covers other factors such as sales, profitability, market share and customer loyalty. Building competitive advantage begins with a thorough strategic situation analysis that includes understanding both the external and internal business environments. Using established business models as investigative tools and linking them together to enhance their analytical value is proposed in this paper as a method of progressing from strategic situation analysis to competitive advantage. Moreover, internal analyses that result in the identification of distinctive competencies and external investigations that uncover industry key success factors give strategists the means to develop strategies that may achieve competitive advantage.

BUSINESS PERFORMANCE REVIEW You should assess current organizational performance in terms of financial and human resources (inputs), operating methods or strategies (processes), and results or outcomes (outputs). If the organization does not have extensive objective measures of its outcomes, perceived performance can be partially determined through asking clients and stakeholders. Try to understand how key players or stakeholders in the broader community -- as well as constituents or clients -- view the organization. Sometimes, brief written forms are sent to, or interviews conducted with, key stakeholders; interviews are best conducted by a al consultant, to assure frank and honest responses. Once you have this information, be sure to further analyze the reasons -- in terms of inputs and processes -- for perceived weaknesses in outcomes. BUSINESS SITUATION ANALYTIC TOOLS

Models require analysts to examine more thoroughly the multitude of factors surrounding the complexities of comprehensive internal and external analyses (Grant, 2008). When recognizable business and strategic management models are not used to examine macro-environmental,


industry, and firm information then analysts lean towards only considering the most superficial evidence available. Not utilizing analytical tools may result is decisions with excessive reliance on hunches and precedent. Strategic decisions must be based on both a thorough analysis and the integration of various internal and external considerations. Methods used for strategic situation analyses may include a variety of business fields from economics and finance to leadership and marketing, and more. Fortunately, there are numerous well-known business models for firm and industry analysis. An exhaustive macro-environmental analysis could include any number of inquiries into fields of study that fall outside of the normal practice of business. Indeed, the macro-environmental issues may involve an understanding of changes in demographics, cultural differences, engineering and information technology, political and legal issues, international relations, threats of civil unrest, and even climate change. Consequently, the complexity of a strategic analysis is simplified by using structured business models and models from other academic disciplines as analytical tools to both rationalize the process and improve the results. Business models may be used as analytical tools throughout the entire process of conducting strategic analyses. Analysts of internal factors have all the models from the various business disciplines available for use as functional tools. Industry analysts are able to utilize strategic management models and concepts, such as Porter’s Five Forces Model of Competition, Driving Forces, Dominant Economic Factors, and others, to determine the critical industry key success factor. Macro environmental analysts must make decisions concerning what external issues have the most direct influence on the industry and hence, the individual strategies of industry competitors.

Strategic Business Situation Analysis The Internal environment

The S.W.O.T anaylsis

The External Environment The Micro-Environment

The Stakeholders Approach Using Porters Five Forces Model Competitive Analysis

The Macro-Environment The P.E.S.T. Analysis

Source: ConceptsLab Consulting Ltd, 2014.

SWOT ANALYSIS

A SWOT analysis can consist of a combination of individual interviews, surveys, focus groups, research of relevant socioeconomic trends, and an internal organizational assessment of the administrative and program-related capacities of the organization. The methods used by the


organization to gather the information required for the SWOT analysis will be based on the financial and human resources available. Firms must build appropriate resources and capabilities to serve as the basis of business-level strategy and to create value for stakeholders (Hitt, Ireland, and Hoskisson, 2009). These resources and abilities are easily identified by careful analysis and from the input of experienced managers. Not all strengths of a firm are of equal importance. A firm’s skills and resources in relation to the organization’s external environment determine the importance of the resources to a firm’s success (O’Farrell, Hitchens, & Moffat, 1993). Certain strengths and unique combinations of strengths that are identified during the analysis will ultimately serve as the basis for strategic decision making. However, determining firm weaknesses is also an important responsibility of strategic analysts to help develop measures to effectively override such deficiencies for organizational efficacy. A weakness may not always be the liability that some less experienced analysts often suggest (Ghemawat, 1991). SWOT Analysis Insights

Strengths What do you do best? What unique resources can you draw on? What is our Unique Selling Proposition?

Weaknesses What could you improve? Where do you have fewer resources than others? What are others likely to see as weaknesses?

Opportunities What opportunities are open to you? What trends could you take advantage of? How can you turn your strengths into opportunities?

Threats What threats could harm you? What is your competition doing? What threats do your weaknesses expose you to?

Source: ConceptsLab Consulting Ltd, 2014. STRENGTHS AND CORE COMPETENCIES A company’s resource strengths represent its competitive assets and determine whether its competitive power in the marketplace will be impressively strong or disappointingly weak. A company that is well endowed with potent resource strengths and core competencies normally has considerable competitive power—especially when its management team skillfully utilizes the company’s resources in ways that build sustainable competitive advantage. Hr\


Rank: 5=very good; 3=satisfactory; 1=poor Potential Resource Strengths and Competitive Capabilities

R Potential Market Opportunities

R

• Core competencies : Accreditations, qualifications, certifications

• Serving additional customer groups or market segments.

• A strong financial condition; ample financial resources to grow the business.

• Expanding into new geographic markets.

• Strong brand name image/company reputation.

• Expanding the company’s product line to meet a broader range of customer needs.

• Economy of scale and/or learning and experience curve advantages over rivals.

• Utilizing existing company skills or technological know-how to enter new product lines or new businesses.

• Proprietary technology/superior technological skills/important patents.

• Falling trade barriers in attractive foreign markets.

• Cost advantages over rivals. • Acquiring rival firms or companies with attractive technological expertise or capabilities

• Product innovation capabilities. • Proven capabilities in improving production processes.

• Good supply chain management capabilities.

• Good customer service capabilities. • Better product quality relative to rivals. • Wide geographic coverage and/or strong global distribution capability.

• Alliances/joint ventures with other firms that provide access to valuable technology, competencies, and/or attractive geographic markets

Source: ConceptsLab Consulting Ltd, 2014. WEAKNESS OR COMPETITIVE LIABILITY A resource weakness or competitive liability is something a company lacks or does poorly or a condition that puts it at a disadvantage in the marketplace. As a rule, strategies that place


heavy demands on areas where the company is weakest or has unproven ability are suspect and should be avoided. hrRank: 5=very good; 3=satisfactory; 1=poor Potential Resource Weaknesses and Competitive Deficiencies

R Potential External Threats to a Company’s Future Prospects

R

• No clear strategic direction. • Increasing intensity of competition among industry rivals—may squeeze profit margins.

• No well-developed or proven core competencies.

• Slowdowns in market growth.

• A weak balance sheet; burdened with too much debt.

• Likely entry of potent new competitors.

• Higher overall unit costs relative to key competitors.

• Growing bargaining power of customers or suppliers.

• A product/service with features and attributes that are inferior to those of rivals.

• A shift in buyer needs and tastes away from the industry’s product.

• Too narrow a product line relative to rivals.

• Adverse demographic changes that threaten to curtail demand for the industry’s product.

• Weak brand image or reputation. • Vulnerability to unfavorable industry driving forces.

• Weaker dealer network than key rivals. • Restrictive trade policies on the part of foreign governments.

• Behind on product quality, R&D, and/or technological know-how.

• Costly new regulatory requirements.

• Lack of management depth. • Short on financial resources to grow the business and pursue promising initiatives.

• Inferior or unproven skills, expertise, or intellectual capital in competitively important areas of the business.

• Deficiencies in competitively important physical, organizational, or intangible assets.

• Missing or competitively inferior capabilities in key areas.



THE VALUE OF A SWOT ANALYSIS

A SWOT analysis involves more than making four lists. The most important parts of SWOT analysis are:

1. Drawing conclusions from the SWOT listings about the company’s overall situation.

2. Translating these conclusions into strategic actions to better match the company’s strategy to its resource strengths and market opportunities, correcting problematic weaknesses, and defending against worrisome external threats.

PEST ANALYSIS

Pest analysis assesses a business from the standpoint of the political, economical, social, and

technological trends of a particular market/ industry.

Consider the following factors and carefully consider the impact of the factors on your business.

Considerable:

• Statutory insights

International legislation&

pressure groups

Domestic market pressure

groups

• Regulatory bodies

and processes

Accreditations &Affiliations

• Government term

and Change in

policies

• Funding, grants and

Initiatives

• Wars and conflict

Political Economical

Considerable:

• Business Economy

System

Regularisation and

Commercialisation Policy

• Taxation

• Market/trade cycles

• Specific industry

factors

• Customer/end-user

drivers

• Interest/ exchange

rates


Considerable:

• Lifestyle trends

• Demographics

Birthrate

Mobility rate

• Brand image and

Consumer attitudes

and Opinions

• Media views Social

factors

• Major events and

Influences

• Buying access and

trends

• Ethnic/religious

belief

Social Technological

Considerable:

• Competing technology

Development

• Operational

Technological

Improvement/Replace

ment

• Industry Information&

Communications

Mechanisms/technolo

gy

• Technology legislation

• Innovation potential

• Technology access,

Licencing, patents and

Intellectual property issues

• Global

communications


A proper application of this macro environment analytical tool will avail businesses the ability to maneuver external forces by having them catered for in their plan so as to underline directions for operations in the business year.


STAKEHOLDERS APPROACH USING PORTER’S FIVE FORCES OF COMPETITIVE POSITION

Source: Based on Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980); and Michael E. Porter, “Strategy and the Internet” Harvard Business Review (March, 2001), 63–78.

Competitive Rivalry, eg:

•Number and size of firms• Industry size and trends• Fixed variable cost bases• Product/service ranges• Differentiation strategy

Product and Technology

Development, eg:

•Alternatives price/quality• Market distribution changes• Fashion and trends• Legislative effects

New Market Entrants, eg:

•Entry ease/barriers•Geographical factors• Incumbents resistance• New entrant strategy• Routes to market

Buyer Power, eg:

•Buyer choice• Buyers size/number• Change cost/frequency• Product/service importance• Volumes, JIT scheduling

Supplier Power, eg:

•brand reputation•geographical coverage• product/service level quality•relationships with customers•bidding processes/capabilities


COMPETITIVE ANALYSIS Doyle stresses the importance of analyzing direct competitors, known as the strategic group, as they focus on the same target market segments and will pursue similar strategies. It is also important to be aware of incidental competitors providing products, as they can pose a major threat to the brand. One salient truth about identified and unidentified competitors is that they compete with your business for the market share of your target market segment and disposable income. There is a high number of competing businesses within the market, which can be categorized into four types as illustrated below. Similar PRODUCTS Different

Similar CUSTOMER Different

DIRECT COMPETITORS

INDIRECT COMPETITORS

PRODUCT COMPETITORS

IMPLICIT COMPETITORS

Source: Doyle (1998)

1. Direct Competitors – other businesses in the industry that sell or offer the same brand of products (goods and services) to the same market segment as your business. Elementary schools Vs Elementary Schools

2. Indirect Competitors – other businesses in the industry that sell or offer different or

complementary products (goods and services) to the same market segment as your business. Secondary schools vs Private Tutors

3. Product Competitors – other businesses in the industry that sell or offer the same brand

of products (goods and services) to a market segment other than that of your business. Elementary Schools vs Secondary Schools


4. Implicit Competitors – other businesses in the industry that sell or offer different products (goods and services) competing for the same share of the market segment and their disposable income. Elementary Schools vs Beverage stores

Brand Assets & Competencies

Your Business

Dire

ct

com

petit

or

Indi

rect

co

mpe

titor

Prod

uct

com

petit

or

Impl

icit

com

petit

or

Critical Success Factors Product quality/range

Brand Awareness/Loyalty

Advertising/Promotion Skills

Product Differentiation

Secondary Factors Growth of target Segment

Financial Capability

Cost Minimization

Positioning

• Rate: Strong – 5 Average – 3 Weak – 1 Source: ConceptsLab Consulting Ltd, 2014.


UNDERSTANDING THE STRATEGIC PLANNING CONCEPT

There is broad agreement among nonprofit leaders and experts that planning is a critical component of good management and governance. Planning helps assure that an organization remains relevant and responsive to the needs of its community (customers), and contributes to organizational stability and growth. It provides a basis for monitoring progress, and for assessing results and impact. It facilitates new program development. It enables an organization to look into the future in an orderly and systematic way. From a governance perspective, it enables the Board to set policies and goals to guide the organization, and provides a clear focus to the Executive Director and staff for program implementation and agency management.

Strategic planning is the process by which leaders of an organization determine what it intends to be in the future and how it will get there. To put it another way, they develop a vision for the organization's future and determine the necessary priorities, procedures, and operations (strategies) to achieve that vision. Included are measurable goals which are realistic and attainable, but also challenging; emphasis is on long-term goals and strategies, rather than short-term (such as annual) objectives. Strategic planning assumes that certain aspects of the future can be created or influenced by the organization. Strategic planning is ongoing; it is "the process of self-examination, the confrontation of difficult choices, and the establishment of priorities" (Pfeiffer et al., Understanding Applied Strategic Planning: A Manager's Guide). Strategic planning involves "charting a course that you believe is wise, then adjusting that course as you gain more information and experience" (Wilder Foundation, Strategic Planning Workbook).

Strategic planning should not be confused with other planning processes such as business planning, program planning or community planning, also referred to as neighborhood planning. Although closely related, strategic planning focuses on establishing your organizational direction, setting priorities and identifying obstacles and opportunities that may limit or enable you to carry out your mission. While closely related to long-range planning, strategic planning is generally considered to place a greater emphasis on strategies – on how the organization will achieve its vision – while long-range planning places greater emphasis on determining the vision.

Strategic planning focuses on establishing your organizational direction, setting priorities and identifying obstacles and opportunities that may limit or enable you to carry out your mission.


STRATEGIC PLANNING PROCESS

• VALUE PROPOSITION • VISION CONCEPTION • MISSION DESIGN • SMART GOALS • OBJECTIVES DERIVATION • PORTFOLIO PLANNING • SCENERIO PLANNING • COMPETENCY PLANNING

VALUE PROPOSITION

Over the years many business have failed because of their inability to identify their comfort zone/ strength. The unique selling proposition of every business is what helps it to build a world of its own in business rather than adapting in a world that was created by other market forces.

Core values form the basis for our beliefs about life, us and those around us, and the human potential of ourselves and others. Values and beliefs form our attitudes and guide our behavior. The behaviors we engage in are what people around us see, along with our skills and actions. Our outer or public shell of behaviors and skills can change rapidly and dramatically through our lives, influenced by our environment and guided by our more stable core values and beliefs. A company’s value proposition is that distinction it wishes to evolve and sustain over time in the course of its business. This however becomes a source to its other organizational culture.

Even though we frequently talk about mission and vision first, the basic underlying foundation for both is our core value. Core values are the principles and standards at the very center of our character, and from which we will not budge or stray. Core values are extremely stable and change only very slowly over long periods of time. Core values are so close to the center of who we are that they tend to be very protected and not shared with others until a personal relationship has been established. The fact that these values are so central to what’s important to us individually, makes it all the more important to

Considering Japan’s Fuji Photo Film Company, the company had its value proposition to be affordability so as to be a low-cost provider to compete with Kodak. Fuji’s relentless internal cost-cutting enabled the company to offer customers lower prices and gradually gain market share over the giant U.S. firm. Larfarge Wapco cement in previous years sought to develop a new core value proposition which will enable it survive in its own industry. The company adopted a prioritized safety value proposition as well as quality product composition from which it has newly developed cost minimization value that will all lend credence to its profitability.


think about them first as a basis for establishing sound and meaningful mission, vision and goals in our business. The vision of a business is that destination which the organization has conceived, agreed and committed its competency and time to achieve. Consider the following values that can help you develop realistic and business visions for your planning process in the planning year. Rank them in order of their importance to YOUR business as guiding principles in YOUR business Work slowly and think carefully. If you change your mind, feel free to change your numbers. The end results should show your business ideology. Add values that are important to your business but missing from the list. VALUES CHARACTERISTICS

_____Low Price Affordable prices that are relatively lower than that of competitors

_____Consumer Satisfaction Customer needs and behavior are foremost and guiding precept for business decisions.

_____Product Quality Geared effort towards process and total quality of output.

_____Staff proficiency Competency and efficiency of human capital is paramount.

_____Cost Minimization Cost avoidance and reduction is the business ideology.

• VISION CONCEPTION

It is a business and personal development axiom that “you don’t miss a target that you didn’t set.” Therefore the saliency of vision cannot be less emphasized as it is a quintessential priority in the strategic planning process. Nothing was ever created without a vision. It guides us, gives us direction and purpose, and can serve as a powerful motivator for those around us and ourselves. In order to truly guide and motivate a vision must: 1. Be aligned with the core values of both the individuals and the business. 2. Be effectively communicated to and accepted by everyone involved in the business, mostly those have roles to play in actualizing it.


THE VISION CONSTRUCT

Community Vision – your vision for the community; it might be viewed as your image of what the community you serve would be like if your values were shared and practiced by everyone in the community in the business year. Organizational Vision -- this is a vision of where the organization wants to be at the end of the business year or planning period. This is a connection that has interacted with all the internal constituent interests (Top management level, middle level management and lower management level) to formulate an agreed beneficial projection. The development of a shared vision is usually best done with both Board and staff involvement. For a small organization, a joint Board-staff process may be practical. For a large organization, a two-stage process might be useful, with staff first working together on a vision, then having the Board and key staff participate in a similar process, in which they review and incorporate the staff vision with their own.

VISION

CORE VALUE

ORGANISATIONAL VISION

MISSIONGOALS

OBJECTIVES

COMMUNITY VISION


Staff Interest Staff Vision Org. Vision Org. Interest

Physiological Profitability Job Satisfaction Productivity Career development Market share Self actualization Wealth creation

An effective integration of these two interests will ensure a collaborative participation in the actualization of the set vision. MISSION INSIGHT A mission statement broadly outlines the organizations future direction and serves as a guiding concept for what the organization is to do and to become. Overriding premise in line with the values or expectations of stakeholders. This is the stated purpose for your organization’s existence; it might be viewed as your organization’s public statement of the contribution it promises to make to help accomplish the community vision. The mission describes the approach the organization will take to achieve the vision. To articulate your mission, board members should answer the following questions: What will the organization do to accomplish the vision? What types of services or products will the organization provide (housing counseling, housing construction and rehabilitation, educational services, economic development services, etc.)? Who will be the primary beneficiaries of these activities?

Sample Mission Statement: Increase the amount of affordable housing and home ownership in Ifo, Ogun state and help those residents achieve better lives through serene environment.

STRATEGIC MISSION

What is our business?


Mission Statement Combine concepts from your value proposition, vision statement to create your personal mission statement.

MISSION STATEMENT

VISION STATEMENT

VALUE PROPOSITION


SMART GOALS

Develop a series of goals or organizational status statements which describe the organization in a specified number of years – assuming it is successful in addressing its mission. It is usually a short step from the vision to goals – sometimes the statements describing the vision are essentially goal statements. It is extremely valuable to transform the vision into a series of key goals for the organization, preferably in the form of status statements describing the organization. For example, goals might cover a variety of categories, stated as follows:

Source: Based on Mossaica 2001, “strategic planning, 10 step guide.”

Program:

•will provide comprehensive services to youth from pre-school through college age•Goal :

Resources:

• will have a budget of 3 million and a staff of 40•Goal :

Status :

• will be the largest and most respected nonprofit housing development corporation in Lake County•Goal :

Institutional Development:

• will own its own headquarters building, which will also have space for rent to other community-based organizations and a fully computerized financial management and management information system, with all staff connected through a network

•Goal :

Relationships:

•will be represented on major coalitions in its program areas and on the Boards of at least three major mainstream organizations

•Goal:

Governance:

•will establish three active working committees – Programs, Finance, and Resource Development – which will meet bimonthly and consistently have quorums.

•Goal:


Thus these goals must be framed and presented in such a way that they are: S – Specific M – Measurable A – Ambitious R – Realistic T – Time-Bound OBJECTIVES DERIVATION

This is the nigh relation of the organizational goals to the motives of the beneficiary. It involves stating the benefits of accomplishing each of the set and stated organizational goals. This is no hard task as all it takes is just the idenfication of the beneficiaries of each goals and stating their benefits. For example: if the organizational resources goal is to have 40 staffs in 2015; the underlying objectives will include: To increase productivity To increase profitability To promote current subordinates to become superior officers To increase production capacity.

It is however a planning function through objective derivation to identify the beneficiaries of set goals of the organization in pursuance of its mission to realize its vision while upholding its core value. PORTFOLIO PLANNING After concerted efforts have been geared towards determining the destination of the firm, it becomes another r saddled responsibility on the strategic planning function to determine the company it needs to keep in the short or long run. The task of planning the portfolio is determining the range and type of business at the needed extent that the business needs to engage in profitably in relation to its unique selling point. This is determining the various services or products which in the planning period the enterprise is going to venture into to ensure profitability and focus. Portfolio planning earns for business the leverage it needs to survive and compete. It include the levels of business integration.


For a school business, it can choose to concern itself with several other business that are required by its market segment.

Source: conceptslab consults, 2014. However, the choice of auxiliary business or core business should be carefully planned and integrated into the whole business so as to be able to evaluate indifferent contributions of the various units of the business. One very good analytical planning tool for portfolio planning is the “make or buy” decision which considers the profitability impact of each business decisions.

school business

educational services

elementary secondary tutorial

auxilliary services

books sales uniform sales

laundry services

hostel facilities


SCENERIO PLANNING

Six-Step Scenario-based Approach to Strategic Planning

Source: Center for Scenario Planning – Roland Berger Research Unit,2010. The use of scenarios in strategic decision making and corporate planning was pioneered by the Royal Dutch/Shell Company during the 1970s. The method is best suited to organisations and industries which are extremely sensitive to external factors beyond their control and where time frames are relatively long. Scenario planning is a strategic planning tool or method for improving decision making against a background of possible future environments. In simple terms, a scenario is an internally consistent account of how the business environment, the external environment, in which an organisation operates, might develop and change over time. Scenarios are however instruments for ordering people’s perceptions about alternative futures in which decisions made today might play out. A scenario embodies a plausible view or perception of the future in a given year linked to conditions in the present via an internally consistent sequence of events. A scenario could be described as a road map from the present to the future.


According to Schwartz (1991, p.144), 'in most good scenarios, plot lines intersect, just as a good film often includes several sub-plots'. A scenario planner is like an author or script writer. The planner considers the converging forces in the plots and attempts to understand how and why they might intersect. From that analysis and understanding, coherent pictures of alternative futures are constructed. These are the scenarios. To summarise, scenarios address:

issues, trends and events in the current environment that are of concern to the organisation's decision makers;

elements in the environment that are somewhat certain or predictable – referred to as predetermined events or variables; and

elements in the environment that are more uncertain such as: • trend breakers that affect a system in unpredictable ways, but with

understandable dynamics • turning points or discontinuities in the business environment, which may

be identifiable in the present although often as weak signals of change (factors that should be monitored)

• previously encountered events such as new technologies or natural disasters.

SCENERIO BUILDING The scenario building approach presented in this paper can be used for all three purposes explained above. Nevertheless, it is mostly applicable to the third purpose as its holistic approach aims at utilizing scenario planning for a company’s continuous strategic planning activities. Establishing a common understanding, we see scenarios as a plausible description of how the future may develop based on a coherent and internally consistent set of assumptions about key relationships and driving forces (Metz, Davidson, Bosch, Dave and Meyer, 2007). Scenarios in the context of our approach are not meant as a forecast or precise prediction nor do they state a desired future (Lindgren and Bandhold, 2009). Rather they produce a picture or a story describing a possible future which, as explained in the previous paragraph, supports organizational learning and readiness for unforeseen events. In the sense of this manual, scenarios provide different views on the nature of the future (van der Heijden, Bradfield, Burt, Cairns and Wright, 2002). Put differently, scenarios try to answer so-called ‘What if…?’ questions, evidently bringing risks as well as opportunities to an organization’s attention, rather than concealing them (Lindgren and Bandhold, 2009). In the six-step scenario-based approach to strategic planning, scenarios go even one step further by answering ‘What if, then…!’ questions and hence giving strategic recommendations for a specific course of action to be undertaken by organizations in the four scenarios (Liebl, 2002). This aspect however, will not be


examined in this paper, but in the subsequent one focusing on the ‘Strategy Adotion and Implementation Phases THE ‘SCENARIO MATRIX’ TOOL The ‘Scenario Matrix’ tool described in this paper follows an approach which was first introduced by van der Heijden (2005). The scenario matrix is a deductive method useful for constructing and describing scenarios in uncertain and volatile situations. Deductive scenario methods are perceived as the most analytical and exhaustive ways of building scenarios from an outside-in perspective (van der Heijden , 2005). The scenario matrix builds and visualizes four scenarios based on two key uncertainty factors. Four is regarded as the maximum number of scenarios that decision makers are still able to manage (Wack, 1985b; van der Heijden, 2005).

Source: van der Heijden, K. (2005): Scenarios – The Art of Strategic Conversation, 2nd Ed., JohnWiley & Sons: Chichester, 2005.


COMPETENCY PLANNING

Competency is said to be the state or quality of being able and qualified to undertake successfully a given task. Competency being the ability to perform efficiently and as expected for the realization of a pre-determined goal requires the management function of planning. Competency planning is the process of determining the needed fortification and resources which a business needs to achieve it set goals and realize its pictured vision.

Competency planning is an estimation of what is and what will be needed to accomplish the mission of the organization. Majorly the resources of a company poses and levels it competency in achieving its goals. Therefore, when goals are set, resources should be planned to have an overview of when and where they will be required in the process of accomplishing the goals.

Organization resources have been identified to be the major production inputs, they are:

• Man (skills, Knowledge, Behaviour), Machine, Materials, Money, Time, Information These resources should be planned in line with the predetermined goal. With special emphasis on the human capital requisition; this is a salient input in the production process, the human capital should not only be estimated based on quantitative requirement alone but also the qualitative requirement (skills, Knowledge, Behaviour) , the implication of this deficiency can be very devastating to the business.

Consider the worksheet, input goals and estimate resources required: Goals Resources Program Goal • Man -

Skills- Knowledge- Behaviour-

• Machine - • Materials- • Money- • Time- • Information -

Status Goal • Man - Skills- Knowledge- Behaviour-


Goals Resources


Resources Goal • Man - Skills- Knowledge- Behaviour-


Relationship Goal • Man - Skills- Knowledge- Behaviour-


Institutional Development Goal • Man - Skills- Knowledge- Behaviour-


Governance Goal • Man - Skills- Knowledge- Behaviour-


Source: Conceptslab Consult,2014.


STRATEGY ADOPTION AND IMPLEMENTATION PHASES

THE CONCEPT OF STRATEGY

Ansoff (1965) defines strategy as the common thread among the organization’s activities and product-markets that defines the essential business that the organization was planned to be in the future. Stokes (1997:223) defines strategy as a plan or pattern that brings together an enterprise’s major objectives, policies and activities into a cohesive whole. More so, the Institute of Strategic Management Nigeria defined strategy as a coherent pattern of decisions, actions and approaches, which if properly formulated, implanted, implemented and controlled, will enable an organization build capability, manage change, build competitive advantage and achieve sustainable successful performance. Glueck (1972) defines strategy as a unified, comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved. However, Mintzberg (1987) asserts that there is a distinction between deliberate/intended strategy and emergent (process) strategy and as such defined strategy as a pattern in a stream of decisions and actions. Mintzberg (1994) argues that only open and creative strategic thinking will lead to the emergence of those innovative strategies that lay the basis for superior performance. Thus, a synthesis is needed that combines the flexibility and openness of a typical strategic thinking with the clear frameworks and application-orientation of strategic planning (Whittington and Cailluet, 2008; Grant, 2003). Frameworks for strategy creation need to follow a systematic process which incorporates specific strategy tools and they need to be adaptable to environmental changes (Ghobadian et al., 2008). Overall, frameworks for strategy creation which integrate the planning and the process perspectives of strategy have to fulfill four major requirements: Multiple options: An integrative strategy framework needs to explicitly consider different strategy options in order to account for environmental turbulence and prepare the company for the diversity of possible future developments. Multiple perspectives: An integrative strategy framework needs to consider viewpoints and information from diverse stakeholders in order to challenge existing assumptions and overcome inertia. Systematic, tool-based process: An integrative strategy framework needs to be based on a clear process for which specific strategy tools are defined so that an easy and quick application to practice is possible. Flexibility: An integrative strategy framework needs to be adaptable to different environmental conditions in order to ease application.


PURPOSE OF STRATEGY Within the overall grand strategy of an organization, executives define an explicit strategy, which is the plan of action that describes resource allocation and activities for dealing with the environment and attaining the organization’s goals. The essence of formulating strategy is choosing how the organization will be different. Managers make decisions about whether the company will perform different activities or will execute similar activities differently than competitors do. Strategy necessarily changes over time to fit environmental conditions, but to remain competitive, companies develop strategies that focus on core competencies, develop synergy, and create value for customers.

WHAT IS STRATEGY FORMULATION?

Strategy adoption/ formulation is the stage of strategic management that involves the planning and decision making that lead to the establishment of the organization’s goals and of a specific strategic plan. STRATEGY FORMULATION DIMENSIONS

GRAND STRATEGY: is the general plan of major action by which a firm intends to achieve its long-term goals. Grand strategies fall into three general categories: growth, stability, and retrenchment.

STABILITY: The stability dimension of strategy is also referred to as pause strategy, which helps an organization to remain the same size or grow slowly and in a controlled fashion.

RETRENCHMENT: This dimension of strategy helps an organization go through a period of forced decline by either shrinking current business units or selling off or liquidating entire businesses. The organization may have experienced a precipitous drop in demand or patronage of its products or services, prompting managers to order overall cuts in personnel and expenditures.

GROWTH: This dimension of strategy helps an organization to gain a sustainable increment in resources and market presence. The growth strategy can be adopted internally by investing in expansion or externally by acquiring additional business divisions. Internal growth can include development of new or changed products, External growth typically involves diversification, which means the acquisition of businesses that are related to current product lines or that take the corporation into new areas. Another strategy for international


growth is the formation of a joint venture. An efficient tool for this dimension of strategy is the Ansoff’s Growth Strategy Matrix The Ansoff Matrix was designed by Igor Ansoff to classify and explain different growth strategies adoptable by a company. This matrix is used by companies which have a growth target or a strategy of specialization. This tool facilitates growth decision making by crossing products and markets of a company. E\ EXISTING MARKET NEW

EXISTING PRODUCT NEW Penetration New Existing Sell more of your product to existing customers of that product. Attract customers from your competitors with new and improved features, a lower price, or increase in service. How can you update or upgrade your existing products to increase your market share?

Product Development Develop a new product for customers already loyal to your brand. This entails additional product development costs, but eliminates the cost of acquiring new customers. What new product can you offer your customers who are already loyal to your brand?

Market Development Introduce your existing product or service to a completely new market or segment. This could include a new region, country, or demographic group. What markets could benefit from your products if given the chance to purchase them?

Diversification Enter a new market with a completely new offering. Doing this entails significant costs and risk, but can be extremely rewarding. Is there a market with a need your company or brand can satisfy with the right new product or service?

Source: H.I. Ansoff, New Corporate Strategy (New York: Wiley, 1988), p. 109.


STRATEGY FORMULATION/ ADOPTION LEVEL

Source: Conceptslab Consult,2014.

CORPORATE LEVEL STRATEGY “What business are we in?”

Corporate-level strategy concerns itself with the organization as a whole and the combination of business units and product lines that make up the corporate entity. It is the determination of the nature of business which the business will venture into in the planning year in view. This is the same in the context of portfolio planning which relates with ascertaining the various businesses that the business will embark on. Strategic actions at this level usually relate to the acquisition of new businesses; additions or divestments of business units, plants, or product lines; and joint ventures with other corporations in new areas. One strategic tool for making this decision is the BCG matrix

BCG MATRIX

A concept developed by the Boston Consulting Group that evaluates SBUs with respect to the dimension of business growth rate and market share.

CORPORATE STRATEGY

WHAT IS OUR BUSINESS?

BUSINESS-LEVEL STRATEGY

HOW DO WE COMPETE?

FUNCTIONAL STRATEGY

HOW DO WE SUPPORT THE BUSINESS-LEVEL

COMPETITIVE STRATEGY?

An example of corporate-level strategy is Cisco Systems, which bought 71 companies between the years of 1993 and 2000 to complement the company’s core business of selling hardware and software for the Internet. Rather than pouring money into research, Cisco managers’ strategy has been to buy companies that make products that will round out Cisco’s existing product line and move the company into new markets.


The BCG matrix aligns businesses along two dimensions—business growth rate and market share. Business growth rate depicts how fast the entire industry is increasing. Market share defines whether a business unit has a larger or smaller share than competitors. The combinations of high and low market share and high and low business growth provides four categories for a corporate portfolio.

Source: Boston Consulting Group

THE STAR has a large market share in a rapidly growing industry. The star is important because it has additional growth potential, and profits should be plowed into this business as investment for future growth and profits. The star is visible and attractive and will generate profits and a positive cash flow even as the industry matures and market growth slows. THE CASH COW exists in a mature, slow-growth industry but is a dominant business in the industry, with a large market share. Because heavy investments in advertising and plant expansion are no longer required, the corporation earns a positive cash flow. It can milk the cash cow to invest in other, riskier businesses. THE QUESTION MARK exists in a new, rapidly growing industry but has only a small market share. The question mark business is risky: it could become a star, or it could fail. The corporation can

BUSI

NES

S G

ROW

TH R

ATE

HIGH MARKET SHARE LOW

STARS Rapid growth and expansion.

QUESTION MARKS New ventures. Risky—a few become stars, others are divested.

CASH COWS Milk to finance question marks and stars.

DOGS No investment. Keep if some profit. Consider divestment.

LOW LOW

The most famous cash cow in Gillette’s portfolio is the shaving division, which accounts for more than half of the company’s profits and holds a large share of a stable market. Gillette’s razors hold a commanding share of the U.S. market, and sales in other countries are also strong. The Oral-B division with its steady stream of new products has also been a cash cow, although sales have slowed in recent years. The Braun subsidiary has star status, and managers are pumping money into research and development of new electric toothbrushes, personal diagnostic equipment, and other products. The Duracell division is a question mark. When Gillette purchased the division in 1996, it hoped Duracell would be a vehicle for rapid growth, becoming a star and eventually as big a cash cow as razors and blades. However, so far, the heavy investment in batteries is not paying off. Rivals Energizer and Rayovac have pummeled Duracell’s new high-priced, long-lasting batteries with price cuts and special promotions. Rather than charging up Gillette’s bottom line, Duracell has proven to be a serious drain on company profits. The toiletries division is also a question mark. A line of women’s toiletries aimed at the European market failed, and products such as Right Guard and Soft & Dri deodorant have enjoyed only cyclical success. A new line of men’s toiletries, including a gel-based deodorant, a gel shaving cream, and a new body wash, has had only limited success. Some critics believe the division is a dog, but Gillette is still trying to come up with some new products to save it from the fate of the Cricket disposable lighter several years ago. Bic dominated the disposable lighter line so completely that Gillette had to recognize Cricket as a dog and put it out of its misery through liquidation. Gillette is investing heavily in its question marks, particularly Duracell, to ensure that its portfolio will continue to include stars and cash cows in the future. William C. Symonds, with Carol Matlack, “Gillette’s Edge,” Business Week (January 19, 1998), 70–77; William C. Symonds, “Would You Spend $1.50 for a Razor Blade?” Business Week (April 27, 1998), 46; Barbara Carton, “Gillette


invest the cash earned from cash cows in question marks with the goal of nurturing them into future stars. THE DOG is a poor performer. It has only a small share of a slow-growth market. The dog provides little profit for the corporation and may be targeted for divestment or liquidation if turnaround is not possible. BUSINESS LEVEL STRATEGY - “How do we compete?”

Business-level strategy pertains to each business unit or product line. It focuses on how the business unit competes within its industry for customers. Strategic decisions at the business level concern amount of advertising, direction and extent of research and development, product changes, new-product development, equipment and facilities, and expansion or contraction of product lines. After a careful analysis has been done in section two using the porters’ five forces model and the competitive analytical model, the next line of action regards the business level strategy is turn to strategy formulation within the strategic business unit, in the context of how to compete. The same three generic strategies— growth, stability, and retrenchment—apply at the business level, but they are accomplished through competitive actions rather than the acquisition or divestment of business divisions.

COMPETITIVE STRATEGIES : In finding its competitive edge within these five forces, Porter suggests that a company can adopt one of three strategies: Differentiation, Cost Leadership, And Focus. Companies can use the Internet to support and strengthen the strategic approach they choose. Strategy Definition Tools Differentiation

A type of competitive strategy with which the organization seeks to distinguish its products or services from competitors’.

• Acts in a flexible, loosely knit way, with strong coordination among departments.

• Strong capability in basic research distinctive product features.

• Creative flair, thinks "out of the box, exceptional ".

• Strong marketing abilities(advertising, branding)

• Rewards employee innovation. • Corporate reputation for quality or

technological leadership.


Cost Leadership

A type of competitive strategy with which the organization aggressively seeks efficient facilities, cuts costs, and employs tight cost controls to be more efficient than competitors.

• Strong central authority; tight cost controls • Maintains standard operating procedures • Easy-to-use manufacturing technologies • Highly efficient procurement and distribution

systems • Close supervision; finite employee

empowerment • Frequent, detailed control reports

Focus

A type of competitive strategy that emphasizes concentration on a specific regional market or buyer group.

• May use combination of above policies directed at particular strategic target

• Values and rewards flexibility and customer intimacy

• Measures cost of providing service and maintaining customer loyalty

• Pushes empowerment to employees with customer contact

SOURCES: Based on Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: The Free Press, 1980); Michael Treacy and Fred Wiersema, “How Market Leaders Keep Their Edge, ”Fortune, February 6, 1995, 88–98; and Michael A. Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Management (St. Paul, Minn.: West, 1995), 100–113.

PARTNERSHIP STRATEGY An alternative approach to business-level strategy emphasizes collaboration. In some situations, companies can achieve competitive advantages by cooperating with other firms rather than competing. Partnership strategies are becoming increasingly popular as firms in all industries join with other organizations to promote innovation, expand markets, and pursue joint goals. Partnering was once a strategy adopted primarily by small firms that needed greater marketing muscle or international access. Today, however, it has become a way of life for most companies, large and small. The question is no longer whether to collaborate, but rather where, how much, and with whom to collaborate. Competition and cooperation often exist at the same time. FUNCTIONAL STRATEGY – “how do we support the business-level competitive strategy?” Functional-level strategies are the action plans adopted by major departments to support the execution of business-level strategy. Major organizational functions include marketing, production, finance, human resources, and research and development. Senior managers in these departments adopt strategies that are coordinated with the business-level strategy to achieve the organization’s strategic goals.


BUSINESS-LEVEL STRATEGY RELATIVE FUNCTIONAL STRATEGY Differentiation Strategy

• The human resources department which would mean

recruiting additional personnel and training middle managers for movement into new positions.

• The marketing department should undertake test marketing, aggressive advertising campaigns, and consumer product trials.

• The finance department should adopt plans to borrow money, handle large cash investments, and authorize construction of new production facilities

Low-Cost Strategy And Focus Strategy

• The human resources department should develop strategies

for retaining and developing a stable work force, including transfers, advancements, and incentives for efficiency and safety.

• Marketing should stress brand loyalty and the development of established, reliable distribution channels.

• Production should maintain long production runs, production routines and cost reduction.

• Finance should focus on net cash flows and positive cash balances.

Source: ConceptsLab Consults, 2014.

STRATEGY IMPLEMENTATION Strategy implementation is the most difficult and important part of strategic planning. No matter how creative the strategic plan is, the organization will not benefit if it is incorrectly implemented. In practice, there is an increasing recognition of the need for more dynamic approaches to formulating as well as implementing strategies. Strategy is a dynamic and analytical process; it requires vision, intuition, and employee participation. Strategy implementation involves using several tools—parts of the firm that can be adjusted to put strategy into action. Once a new strategy is selected, it is implemented through changes in leadership, structure, information and control systems, and human resources. For strategy to be implemented successfully, all aspects of the organization need to be in congruence with the strategy. Implementation involves regularly making difficult decisions about doing things in a way that supports rather than undermines the organization’s chosen strategy.


SOURCE: Adapted from Jay R. Galbraith and Robert K. Kazanjian, Strategy Implementation: Structure, Systems, and Process, 2d ed. (St. Paul, Minn.: West, 1986), 115. CRITICAL PATH ANALYSIS APPROACH TO STRATEGIC PLANNING As with Gantt Charts, Critical Path Analysis (CPA) helps you to lay out all tasks that must be completed as part of a project. They act as the basis both for preparation of a schedule, and of resource planning. During strategic planning, they allow you to schedule and monitor progress and achievement of organizational goals. They help you to see much focus and where remedial action needs to be taken to actualize a proposed plan. The benefit of using CPA in strategic planning is that Critical Path Analysis formally identifies tasks which must be completed on time for the whole plan to be completed on time, and also identifies which tasks can be delayed for a while if resource needs to be reallocated to catch up on missed tasks. It was developed in the 1950s by the US Navy, originally, the critical path method considered only logical dependencies between terminal elements of a plan. Since then, it has been expanded to allow for the inclusion of resources related to each activity, through processes called activity-based resource assignments and resource leveling. The essential technique for using CPM is to construct a model of the strategic plan into a project that includes the following: A list of all activities required to complete the strategic plan (also known as Work Breakdown Structure) the time (duration) that each activity will take to completion and the dependencies between the activities.

Leadership

•Use persuasive communication•Proper motivation•Organisational culture& value shappening

Structure

•Design an organogram•Team formation•Determine centralisation and decentralisation•Job and facility design/ arrangement

HumanResources

•Staffing•Training and development•Lay off and recalls

Information and Control Systems

•Revise renumeration•Change budget allocation•Efficient information system (feedbak and reply)•Rules and procedure application


CPM calculates • The longest path of planned activities to the end of the strategic plan • The earliest and latest that each activity can start and finish without making the strategic plan

actualization lapse longer. • Determines “critical” activities (on the longest path) • Prioritize activities for the effective management and to shorten the planned critical path of a

project by: o Pruning critical path activities o “Fast tracking" (performing more activities in parallel) o “Crashing the critical path" (shortening the durations of critical path activities by adding

resources) Float (slack) - amount of time that a task can be delayed without causing delay to subsequent tasks (free float) strategic plan completion date (total float) Critical path is the sequence of activities which add up to the longest overall duration. It is the shortest time possible to complete the projects in the strategic plan. Any delay of an activity on the critical path directly impacts the planned project completion date (there is no float on the critical path). A strategic plan project can have several, parallel, near critical paths. An additional parallel path through the network with the total durations shorter than the critical path is called a sub-critical or non-critical path. Critical activity – activity with zero float Resource leveling – iterative process of assigning crews to activities in order to calculate their duration

CRITICAL PATH ANALYSIS PROCESS

Source: Adapted from CRITICAL PATH METHOD (CEE 320 – VDC SEMINAR), 2009. Jesse Santiago & Desirae Magallon

PHASE I

•Break strategic plan into operations necessary for completion

•Determine sequential relationship of operations•Every operation must have event to mark commencement –i.e. completion of preceding operation

•Can operations overlap?

PHASE II

•Create time estimates for each operation

•Determine earliest possible start date, earliest possible finish date , latest start & finish.

•Determine “free float” and “total float”•Revise free float and total floatafter completion of Phase III

PHASE III

•Establish time-cost relationship

•Establish scheduling variations

•Determine most favorable balance between time-cost

•Normal Start –normal time, least cost

•All-Crash Start –least time, higher cost