strategic planning unit 2

7/29/2019 Strategic Planning Unit 2

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Unit 2

Strategy:

Strategic Planning Importance

Advantages

Strategic Versus Operational

Planning


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Good strategy and

good strategy executionare the most trustworthy signs

of good management.


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Strategy

Strategy, a word of military origin, refers to a plan of

action designed to achieve a particular goal.

Business strategy is a long term plan of actiondesigned to achieve a particular goal or set of goals or

objectives.

Strategy is management's game plan for strengthening

the performance of the enterprise.It states how business should be conduct to achieve

the desired goals. Without a strategy management has

no roadmap to guide them.
http://www.rapid-business-intelligence-success.com/why-is-goal-setting-so-important.htmlhttp://www.rapid-business-intelligence-success.com/why-is-goal-setting-so-important.html


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Strategic Planning

A management tool to help the

organization do a better job

Focus energy and resources appropriately

Assess and adjust the organizations

direction in response to a changing

environment


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Strategic planning is a

disciplined effort to produce

fundamental decisions and

actions that shape and guide

what an organization is,what it does, and

why it does it.


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Importance of Strategic Planning

Strategic planning improves performance

Solve major issues at a macro level

Process to establish priorities on what you will

accomplish in the future

Forces you to make choices on what you willdo and what you will not do

Pulls the entire organization together around

a single game plan for execution


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How Strategic Planning Works

Planning involves:

Setting goals

Understanding what we do now

Predicting future scenarios

Determining the best responses to thefuture

Understanding and prioritizing

resources


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A Good Strategic Plan should . . .

Address critical performance issues

Create the right balance between what the

organization is capable of doing vs. what theorganization would like to do

Cover a sufficient time period to close the

performance gap

Visionary convey a desired future end state

Flexible allow and accommodate change

Guide decision making at lower levels


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Three Fundamental

Strategic Questions

Where are we currently?

Where do we want to be in the

future?

How will we get there?


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Strategic Planning Process

Situation Analysis

Developing the Plan Defining the Strategies

Implementing the Plan Monitoring & Evaluation


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Situation Analysis

Situation analysis involves assessing

the strategic fit between external

between opportunities, threats,weaknesses and strengths

Methods to do situation analysis

SWOT

TWOS


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The SWOT Framework

SWOT Analysis Framework

Environmental Scan

/ \

Internal Analysis External Analysis

/ \ / \Strengths Weaknesses Opportunities Threats

SWOT Matrix


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Strengths

A firm's strengths are its resources andcapabilities that can be used for developing acompetitive advantage. Examples of such

strengths include: Patents

Strong brand names

Good reputation among customers Cost advantages from proprietary know-how

Exclusive access to natural resources

Good access to distribution networks


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Weaknesses

The absence of certain strengths are aweakness. For example, the following may be

considered weaknesses: Lack of patent protection

A weak brand name

Poor reputation among customers High cost structure

Lack of access to best natural resources

Lack of access to key distribution channels


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Opportunities

The external environmental analysis may

reveal certain new opportunities for profit and

growth. Some examples of such opportunitiesinclude:

An unfulfilled customer need

Arrival of new technologies

Loosening of regulations

Removal of international trade barriers


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Threats

Changes in the external environmental alsomay present threats to the firm. Some

examples of such threats include:

shifts in consumer tastes away from the

firm's products emergence of substitute products

new regulations

increased trade barriers


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TOWS Matrix

TOWS

Analysis

Strengths Weaknesses

Opportunities S-OStrategies

W-O

Strategies

Threats S-TStrategies

W-T

Strategies


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S-O strategies pursue opportunities that fit

well the company's strengths.

W-O strategies overcome weaknesses topursue opportunities.

S-T strategies identify ways that the firm can

use its strengths to reduce its vulnerability toexternal threats.

W-T strategies make a defensive plan to

prevent the firm's weaknesses from making it

susce tible to external threats.

TOWS Matrix


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Developing the P;lans

Establishing the Vision , Mission, Goals.

Objectives and policies

Analyzing the environment

Demographic Environment

Technological

Sociocultural

Internal Organizational Analysis


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General Environment- Economic

Inflation rates

Interest rates

Trade deficits or surpluses

Budget deficits or surpluses

Personal savings rate

Business savings rates

Gross domestic product


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General Environment- Political

and Legal

Antitrust laws

Taxation laws

Deregulation philosophies

Labor training laws

Educational philosophies and

policies


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General Environment- Socio

cultyral

Women in the workplace

Workforce diversity

Attitudes about quality of worklife

Concerns about environment

Shifts in work and careerpreferences

Shifts in product and service

preferences


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General Environment-

TechnologicalProduct innovations

Applications of knowledge

Focus of private and

government-supported R&D

expenditures

New communication

technologies


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General Environment- Global

Important political eventsCritical global markets

Newly industrialize countries

Different cultural andinstitutional attributes


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Industry Environment

A set of factors that directly influences acompany and its competitive actions and

responses. Interaction among these factors determine

an industrys profit potential.

Threat of new entrants Power of suppliers

Power of buyers

Product substitutes

Intensity of rivalry


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Defining the strategies

Three types of corporate strategy known

as grand strategy are strategies are

Stability Strategy

Growth Strategy

Retrenchment strategy


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Grand Strategy: Growth

Growth can be promoted 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 involvesdiversification businesses related to

current product lines or into new areas


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Growth Strategy

Two types

Concentration- concentration of resources on

product lines with more growth potential

Concentration can be

Vertical- Taking over a supplier

function

Horizontal- Taking over another firm


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Growth Strategy

Diversification- Diversification is a

form of corporate strategy for a

company. It seeks to increaseprofitability through greater sales volume

obtained from new products and new

markets


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Growth Strategy

Types of Diversification

Horizontal or related diversification

Strategy of adding related or similar

product/service lines to existing core

business, either through acquisition of

competitors or through internaldevelopment of new products/services.


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Growth Stratetigy

Horizontal or related diversification

Advantages

Opportunities to achieve economies of scaleand scope.

Opportunities to expand product offerings or

expand into new geographical areas.

Disadvantages of related diversification

Complexity and difficulty of coordinating

different but related businesses.


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Growth Strategy

Conglomerate or unrelated diversification

Firms pursue this strategy for several

reasons: Continue to grow after a core business has

matured or started to decline.

To reduce cyclical fluctuations in sales

revenues and cash flows.

Problems with conglomerate or unrelated

diversification:

Managers often lack expertise or knowledge

about their firms businesses.


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Grand Strategy: Stability

Stability, sometimes called a pause

strategy, means that the organizationwants

to remain the same size or

to grow slowly and in a controlled fashion


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Stability Strategy

Pause/ Processed with care Strategy- After

rapid growth a firm adopts this strategy to

consolidate on resources

No change Strategy- When future is

predicted as unchanging

Profit Strategies- When difficulties arepercieved as temporary


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Grand Strategy: Retrenchment

Retrenchment = the organization goes through aperiod of forced decline by either shrinking currentbusiness units or selling off or liquidating entire

businesses

Liquidation = selling off a business nit for the cashvalue of the assets, thus terminating its existence

Divestiture = involves selling off of businesses that nolonger seem central to the corporation

Implementing the PlanImplementing the Plan


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Implementing the Plan

Establish priorities

Consider the available resources IT, human,financial, physical environment, etc, in determining

the implementation period and the strategies to beimplemented

It is not necessary to tackle all the strategies at thesame time a phased approach is acceptable

Seek technical support in the planning andimplementation processes if the expertise is notavailable in-house

Acknowledge small gains in the process and sharethe achievements


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Monitoring & Evaluation

Periodic review of the implementation process

Obtain feedback from staff/clients/stakeholders

Provide regular feedback to major stakeholders,including staff

Document and communicate the lessons learnt

Acknowledge and share results - achievements andfailures

Continuous monitoring and review of objectivesRemember that the Strategic Managementprocess is a continuous cycle. It does not end.The real objective is continual improvement!


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Strategic Thinking

vs. Operational Planning An operational planning is a subset of

strategic work plan. It describes short-term

ways of achieving milestones and explainshow, or what portion of, a strategic plan will be

put into operation during a given operational

period, in the case of commercial application, a

fiscal year or another given budgetary term. An

operational plan is the basis for, and

justification of an annual operating budget

request..


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Benefits to Strategic Planning

Strategic planning allows people to feel in

control of their future along with an increased

confidence about stepping up toopportunities and managing threats.

Defines mission, vision & values

Establishes realistic goals, objectives &strategies

Ensures effective use of resources


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Benefits of Strategic Planning

Provides base to measure progress

Develops consensus on future direction

Builds strong teams

Solves major problems


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Benefits of Strategic Planning

Increased effectiveness

Increased efficiency

Improved understanding and better learning

Better decision making

Enhanced organizational capabilities

Improved communications and publicrelations

Increased political support


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If you dont know where youre

going, youre liable to wind up

someplace else!

-- Yogi Berra

strategic planning unit 2

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