Chapter 9: Strategic Planning PDF

## Chapter 9: Strategic Planning **What is Strategic Planning?** - Long-term plans that apply to the entire organization, encompassing all aspects of the organization. - Define the organization’s overall ambitions. - Determine the organization's general goals. **Characteristics of Strategic Plan...

## Chapter 9: Strategic Planning **What is Strategic Planning?** - Long-term plans that apply to the entire organization, encompassing all aspects of the organization. - Define the organization’s overall ambitions. - Determine the organization's general goals. **Characteristics of Strategic Planning:** - Created by upper management ("Top Management"). - Long- to mid-term plans. - Implemented at a company-wide level. - Aim to improve the overall organizational performance, boosting competitiveness. **What is Strategic Management?** - What managers do to develop the organization's strategies. **What is the Strategic Design for how a company intends to profit from its strategies, work processes, and work activities?** - The Business Model **Business Model** - The method a company uses to achieve profitability. **Business Model Components:** - Customer value: Do customers appreciate what the company provides? - Profitability: Can the company generate profit from its activities? **Strategies** - Plans for how the organization will conduct its business. - How to compete successfully in the market. - How to attract and satisfy customers to achieve organizational goals. **Why is Strategic Management Important?** - Influences an organization's success. - Enables companies to handle constantly changing situations. - Addresses the complexity and diversity of organizations. **The Strategic Management Process** - A six-step process consisting of strategic planning, implementation, and evaluation. **Step 1: Identify Current Mission, Goals, and Strategies** - The organization's vision defines the organization's ambitious goals for the future. - The organization's mission outlines the organization's raison d'être, or reason for existence. **Components of a Mission Statement:** - **Customer:** Who are the firm's customers? - **Markets:** Where does the firm compete geographically? - **Concern for survival, growth, and profitability:** Is the firm committed to growth and financial stability? - **Philosophy:** What are the firm's basic beliefs, values, and ethical priorities? - **Concern for public image:** How responsive is the firm to societal and environmental concerns? - **Products or services:** What are the firm's major products or services? - **Technology:** Is the firm technologically current? - **Self-concept:** What are the firm's major competitive advantages and core competencies? - **Concern for employees:** Are employees a valuable asset of the firm? **Step 2: External Analysis** - Managers conduct external analysis to identify pending legislation and regulations that may impact the organization. - Analyze economic, demographic, political/legal, and sociocultural trends to identify relevant market changes. - Analyze the firm's own labor supply to understand its external environment. **Key Takeaways from External Analysis:** - **Opportunities** represent positive trends in the external environment. - **Threats** represent negative trends in the external environment. **Step 3: Internal Analysis** - Provides important information about an organization's specific resources and capabilities. **Resources:** - Assets of the organization used to develop, manufacture, and deliver products to customers. - Examples: - Skilled, technical employees - Capital - Experienced managers **Capabilities:** - Skills and abilities that are necessary to carry out organizational work activities. - **Core Competencies:** Key value-creating capabilities that determine the organization's competitiveness. - Example: Communicating with customers in their native languages worldwide. - Resources and core competencies determine an organization's competitive abilities. **Step 4: Formulating Strategies** - Managers must consider the organization's available resources, capabilities, and the external environment when creating strategies. - There are three types of strategies: - **Corporate:** Plans for the overall organization’s strategic direction. - **Competitive:** How a company plans to compete in the marketplace. - **Functional:** How departments support the implementation of the organization's competitive strategy. **Step 5: Implementing Strategies** - Failure to implement strategic plans effectively can lead to poor organizational performance. **Step 6: Evaluating Results** - This is the final step in the strategic management process. - Assess the effectiveness of the implemented strategies. **Corporate Strategies** **Types of Organizational Strategies:** - **Corporate Strategy:** Implemented by top management. - **Business Competitive Strategy:** Implemented by middle management. - **Functional Strategy:** Implemented by lower management. **What is a Corporate Strategy?** - Determines which businesses a company is currently involved in, or aspires to be involved in. - Defines the organization's approach to these businesses. **Types of Corporate Strategies:** - **Growth Strategy:** Expanding on an organization's current business activities to achieve growth in the market. - Increasing the quantity of products or services. - Increasing the number of customers. - **Types of Growth:** - **Concentration:** Focuses on a primary business line. - **Integration:** Acquiring either input or output providers (e.g., suppliers or distributors) to improve the value chain. - **Vertical Integration** - **Backward:** Acquiring supplier companies. - **Forward:** Acquiring distributor companies. - **Horizontal:** Acquiring competitors in the same industries. - **Diversification:** Expanding into different industries that may or may not be directly related to the company's core business. - **Related diversification:** Expanding into related industries. - **Unrelated diversification:** Expanding into unrelated industries. - **Stability Strategy:** Maintaining an organization's current level of business activity. - Focus on keeping market share, and sustaining current organizational operations. - **Renewal Strategy:** Implemented when an organization struggles with declining performance. - **Types of Renewal Strategies:** - **Retrenchment:** A short-term strategy for minor performance issues. - **Turnaround:** A more drastic strategy for serious performance problems. **Managing Corporate Strategies** - **BCG Matrix:** A strategic planning tool that helps allocate resources based on market share and growth rate. - **Cash Cow:** A business unit operating in a low growth market with a high market share. - **Star:** A business with a high market share in a high-growth market. - **Question Mark:** A business unit operating in a high-growth market with a low market share. - **Dog:** A business unit with a low market share in a low-growth market. **Steps for Optimizing the BCG Matrix:** - Invest heavily in **stars** to leverage market growth and enhance their market share. - "Milk" **cash cows** to generate wealth, while minimizing investment. - Consider strategic options for **question marks** to determine how to leverage their potential. - Liquidate or sell **dogs** due to their lack of market share in slow-growth markets. **Competitive Strategies** - **Competitive Strategy:** An organizational strategy that outlines how a company will compete in its market. - **Strategic Business Unit (SBU):** Independent businesses within an organization that formulate their own competitive strategies. **The Role of Competitive Advantage** - What makes an organization distinct from its competitors. - **Quality:** A sustainable competitive advantage achieved by consistently improving quality and reliability of products or services. - **Design Thinking:** Approach to innovation that involves novel and unique thinking about business operations. - **Social Media:** Leverage social media platforms to connect with customers, improve communication, and generate competitive advantage. **Sustaining Competitive Advantage** - External factors like market instability, new technologies, and other changes can challenge attempts at gaining sustainable competitive advantage. - Strategic management can position organizations for long-term sustainable advantage. **Choosing a Competitive Strategy** - **Cost Leadership:** Cost-efficiency as a source of competitive advantage. - **Differentiation:** A unique product or service offering that creates value for customers. - **Focus:** Concentrates on a specific niche market or customer segment. - **Functional Strategies:** How a company's departments support the implementation of the competitive strategy. **Current Strategic Management Issues** - **Strategic Leadership:** Recognizing and understanding factors influencing the organization's performance, enabling it to be adaptable and initiate changes needed to sustain its growth. - **Strategic Flexibility:** Recognizing and adapting to major external changes, efficiently allocating resources, and being able to acknowledge and correct mistakes. - **E-Business Strategies:** Employing e-business techniques to achieve competitive advantage. - For example: Cost leaders can leverage inventory control systems to minimize warehousing costs. - **Customer Service Strategies:** Implementing strategies that prioritize customer satisfaction, emphasizing communication, and training employees to excel in their roles. - **Innovation Strategies:** Determine areas for innovation efforts to create competitive advantage, focusing on process improvement and timely innovation. **Innovation Strategies** - **First Mover:** Being an early adopter in introducing product or process innovation to the market. **First Mover Advantages:** - Reputation for innovation and industry leadership. - Cost and learning advantages. - Control over resources and limited competition. - Opportunities to develop customer relationships and build customer loyalty. **First Mover Disadvantages:** - Uncertainty over precise technological or market directions. - Risk of competitors replicating your innovation. - Financial and strategic risks. - High development costs. **Process Development Strategies** - Seek competitive advantage by improving and enhancing existing work processes. **First Mover:** - Becoming the first company to introduce a new product or process to the market. **First Mover Advantages:** - Cost and learning benefits. **First Mover Disadvantages:** - Risk of competitors imitating innovations. - Uncertainty over future technology or market conditions. **Strategic Planning in a New Business Scenario:** - **CompuSave:** An online B2B reverse auction company founded by Patrick. - **Internal Environment:** Assessing the organization's strengths and weaknesses. - **External Environment:** Identifying threats and opportunities to create strategic plans. **SWOT Analysis** - Analyzing strengths, weaknesses, opportunities, and threats to develop a comprehensive understanding of a company's situation. **Strategic Planning at a Personal Level** - **Casey:** A college student who decides to personally conduct a SWOT analysis.