Strategic Planning and Environmental Analysis

Strategic Planning Process

• Strategic planning stages order depends on a business's viewpoint (positioning-based or resource-based).
• Businesses should develop three strategies: competitive, product-market, and institutional.
• Competitive strategies define how a business competes (generic strategies for advantage).
• Product-market strategies determine where a business competes and growth direction.
• Institutional strategies determine growth methods (e.g., relationships with other businesses).
• Strategy implementation transforms chosen strategies into operational plans and objectives for units.

Environmental Analysis

• Businesses cannot predict the future with certainty.
• Businesses need to consider environmental dynamism (static vs. dynamic).
• Static change is slow, single product/market, simple technology, and safe.
• Dynamic change is fast, diverse products/markets, difficult, and dangerous.
• PESTEL analysis considers political, economic, social, technological, ecological, and legal factors impacting businesses.
• Porter's five forces analysis examines competitive aspects of the task environment (market vs. industry).
• Competitor analysis identifies different competitor types:
  • Brand competitors: Similar firms offering similar products (e.g., McDonald's and Burger King).
  • Industry competitors: Similar product, but differ in aspects like geography or product range (e.g., Tesco and Amazon).
  • Generic competitors: Compete for the same disposable income (e.g., DVD store and bookstore).
  • Form competitors: Offer distinct products satisfying the same need (e.g., matches and lighters).
• Competitor reaction profiles describe competitor vulnerability and best battlegrounds:
  • Laid-back: Doesn't react to competitive moves.
  • Tiger: Responds aggressively to all competitive moves.
  • Selective: Reacts to some threats in some markets, not all.
  • Stochastic: Unpredictable.

Business Analysis

• Businesses should analyze their resources, competencies, value chain, supply chain, products, and markets.
• Resources and competencies analysis involves a position audit examining tangible/intangible assets, finance, products/brands/markets, operational systems (production/distribution), internal organization, current results, and returns to shareholders.
• The 9Ms model categorizes resource factors (machinery, make-up, management, management information, markets, materials, men and women, methods, money).
• Porter's value chain model offers a comprehensive view of business activities, emphasizing how activities create competitive advantage.
• Value drivers enhance consumer value, often through features or branding.
• Cost drivers influence product/service costs.
• Supply chain management (SCM) optimizes business activities to produce goods/services, managing input resources to consumers.
• SCM aspects include reduced suppliers, focused customer concentration, early supplier involvement, and joint problem-solving.
• Product life cycle analysis examines product profitability and investment over time.
• BCG matrix analyses products/services based on market growth rate and relative market share, useful for cash generation/expenditure assessments.
• Relative market share is calculated by comparing an entity's sales to its largest competitor's, defining market leadership via high ratios.

Corporate Appraisal & Objectives

• Corporate appraisal combines analyses to evaluate strengths, weaknesses, opportunities, and threats (SWOT analysis).
• SWOT analysis identifies internal strengths/weaknesses and external opportunities/threats.
• SWOT can be a summary of prior resource/environment studies or the first stage of strategy if a business wants to establish core competencies and objectives.
• Stakeholder analysis considers diverse stakeholder objectives, with dominant stakeholder desires frequently impacting business objectives.
• Mendelow’s power/interest matrix assists in analyzing stakeholder influence.
• Mission statement and strategic objectives are established, with profits for shareholders as a primary objective.

Choosing a Corporate Strategy

• Businesses may choose to continue with existing strategies if no gap exists.
• Possible strategies to close a gap include Porter’s generic strategies (cost leadership, differentiation, focus) and Ansoff's matrix (product/market strategies).
• Porter's cost leadership involves producing goods at the lowest industry cost.
• Porter's differentiation strategy involves offering unique products/services.
• Porter's focus (niche) strategy involves targeting specific market segments by lower cost or unique offerings.
• Ansoff's matrix outlines four growth strategies based on existing/new markets and products.

This quiz covers key concepts of strategic planning processes, including competitive, product-market, and institutional strategies. It also explores environmental analysis focusing on static vs. dynamic changes and the importance of PESTEL analysis. Test your understanding of how businesses formulate strategies based on their environment and operational frameworks.