Strategic Planning PowerPoint Presentation PDF

Introduction to Business Management Topic # 4: Strategic Planning Lecturer: Dr. Kadeen Dennie  Objectives 1. Definitions of both strategic planning and strategy 2. An understanding of the strategic management process 3. A knowledge of the impact of environmental analysis...

Introduction to Business Management Topic # 4: Strategic Planning Lecturer: Dr. Kadeen Dennie  Objectives 1. Definitions of both strategic planning and strategy 2. An understanding of the strategic management process 3. A knowledge of the impact of environmental analysis on strategy formulation 4. Insights into how to use critical question analysis and SWOT analysis to formulate strategy 5. An understanding of how to use business portfolio analysis and industry analysis to formulate strategy 6. Insights into what tactical planning is and how strategic and tactical planning should be coordinated What is Strategic Planning Strategy - a broad and general plan developed to reach long-term organizational objectives Strategic Planning - long-term planning that focuses on the organization as a whole Strategic management - the process of ensuring that an organization possesses and benefits from the use of an appropriate organization strategy. The strategy that best suites the organization. Not necessarily the best strategy Strategic Planning Process  Environmental Analysis Environmental analysis is the study of the organizational environment to pinpoint environmental factors that can significantly influence organizational operations. External Environment- Step 1 S – social values, T – dynamic attitudes, language, technological changes and demographics, E – economic development, GNP, Interest rates, taxes, Natural Environment inflation rates, Per capita income, trade agreements, etc. External Environment – L – laws and legislations to govern P – governments attitude towards political, business, (Consumer business, political economic, Protection Act, Utilities Regulations stability, forms of government, social social, Act, Fair Competition Act, National unrest, technological, Environmental legal, eco- Protection Act, etc.) system. Step 1- Environmental Analysis 2. Industry/Operating Environment - operating environment is the portion of the external environment including customers, competition, labour, suppliers, and international issues 3. Internal Environment - existing within the organization and normally having immediate and specific implications for managing the organization Components include marketing, finance, and accounting. From a specific management viewpoint, it includes planning, organizing, influencing, and controlling within the organization  Porter’s five forces - Porter’s Five Forces Model outlines the primary forces that determine competitiveness within an industry. Threat of new entrants refers to the ability of new firms to enter an industry. Buyer power refers to the power that customers have over the firms operating in an industry. Supplier power denotes the power that suppliers have over the firms operating in an industry. Threat of substitute products refers to the extent to which customers may use products or services from another industry instead of the focal industry. Intensity of rivalry refers to the intensity of competition among the organizations in an industry. Porter’s five forces Step 2: Mission/Direction A mission statement is a written document developed by management, normally based on input by managers as well as non managers, that describes and explains the mission of the organization. The mission is expressed in writing to ensure that all organization members have easy access to it and thoroughly understand exactly what the organization is trying to accomplish. Importance of a mission An organizational mission is important to an organization because it helps increase the probability that the organization will be successful. There are several reasons why it does this. First, the existence of an organizational mission helps management direct human effort in a common direction. The mission makes explicit the major targets the organization is trying to reach and helps managers keep these targets in mind as they make decisions. Second, an organizational mission serves as a sound rationale for allocating resources. A properly developed mission statement gives managers general, but useful, guidelines about how resources should be used to best accomplish organizational purpose. Third, a mission statement helps management define broad but important work areas within an organization and therefore the critical jobs that must be accomplished. Step 3 – Strategy Formulation Strategy formulation is the process of determining appropriate courses of action for achieving organizational objectives and thereby accomplishing organizational purpose Critical Question Analysis: a. What are the purposes and objectives of the organization? b. Where is the organization presently going? c. In what kind of environment does the organization now exist? d. What can be done to better achieve organizational objectives in the future?  SWOT Analysis SWOT Analysis - matching internal organizational strengths and weaknesses with external opportunities and threats SWOT Analysis  Boston Consulting Group - BCG Business Portfolio Analysis – Used to Nlyse business uni and product line the development of business-related strategy based primarily on the market share of a business and the growth of markets in which businesses exist: Boson Consulting Group Matrix - Categorizes each business as:  Star - High growth, high share. Often need heavy investment to finance rapid growth.  Cash Cow - Low growth, high share. Require less investment to sustain already established success. Produce a lot of cash which is often used to support other SBUs  Question Mark - Low share, high growth. Require a lot of cash to hold their share, let alone to increase it. Issue is whether to phase it out or build it  Dog - Low growth, low share. May generate Enough cash to maintain themselves but not much promise  Boston Consulting Group - BCG Relative market share – measure of the SBU’s strength in the market Market growth – measures market attractiveness This Photo by Unknown Author is licensed under CC BY-NC  BCG Stars also generate large amounts of cash for the organization and are usually segments in which management can make additional investments and earn attractive returns. Cash cow Naturally, these SBUs provide the organization with large amounts of cash, but because the market is not growing significantly, the cash is generally used to meet the financial demands of the organization in other areas, such as the expansion of a star SBU. ? - Management will choose the first option when it believes it can turn the question mark Dog - Such SBUs may barely support themselves; in some cases, they actually drain off cash resources generated by other SBUs. Examples of dogs are SBUs that produce typewriters or cash registers into a star and will choose the second when it thinks further investment would be fruitless. BCG And the relevant business strategy is recommended:  Build – invest more; allocate more resources (for stars and some question marks)  Harvest – increase short tem cash flow (for weak cash cows and some question marks)  Hold – preserve business as is (strong cash cows)  Divest – sell or liquidate (dogs and some question marks) Decisions are made based on: What are the purposes and objectives of the organization? Where is the organization presently going? In what kind of environment does the organization now exist? What can be done to better achieve organizational objectives in the future?  GE - McKinsey and Company An organizational mission is important to an organization because it helps increase the probability that the organization will be successful. There are several reasons why it does this. First, the existence of an organizational mission helps management direct human effort in a common direction. The mission makes explicit the major targets the organization is trying to reach and helps managers keep these targets in mind as they make decisions. Second, an organizational mission serves as a sound rationale for allocating resources. A properly developed mission statement gives managers general, but useful, guidelines about how resources should be used to best accomplish organizational purpose. Third, a mission statement helps management define broad but important work areas within an organization and therefore the critical jobs that must be accomplished. Porter’s 3 Approaches to Strategy Formulation Differentiation - a strategy that focuses on making an organization more competitive by developing a product(s) that customers perceive as being different from competitors’ products Cost Leadership - making an organization more competitive by producing its products more cheaply than its competitors Focus - making an organization more competitive by targeting a particular and smaller customer group (niche) General Organizational Strategies Organizational strategies: Growth - increase the amount of business Stability - seeking to maintain Retrenchment – military sense of fortifying or defending OR downsizing to overcome current performance problems Divestiture - eliminate business unit (SBU) that is not generating a satisfactory amount of business and has little hope of doing so in the near future  Step 4 - Strategy Implementation Interacting skill is the ability to manage people during implementation. Managers who are able to understand the fears and frustrations others feel during the implementation of a new strategy tend to be the best implementers. These managers empathize with organization members and bargain for the best way to put a strategy into action. b. Allocating skill is the ability to provide the organizational resources necessary to implement a strategy. Successful implementers are talented at scheduling jobs, budgeting time and money, and allocating other resources that are critical for implementation. Strategy Implementation Monitoring skill is the ability to use information to determine whether a problem has arisen that is blocking strategy implementation. Good strategy implementers set up feedback systems that continually tell them about the status of strategy implementation. Organizing skill is the ability to create throughout the organization a network of people who can help solve implementation problems as they occur. Good implementers customize this network to include individuals who can handle the special types of problems anticipated in the implementation of a particular strategy.  Comparing Strategic and Tactical Planning Tactical planning is short-range planning that emphasizes current operations of various parts of the organization Comparing and Coordinating Strategic and Tactical Planning – 4 major differences Strategic plans are usually developed by upper-level management, and tactical plans are usually developed by lower-level management Strategic plans are usually more difficult to gather than facts upon which to base tactical plans Strategic plans generally are less detailed than tactical plans Strategic planning focuses on the long run, and tactical planning focuses on the short run Competitive Dynamics Competitive Dynamics - the process by which firms undertake strategic and tactical actions and how competitors respond to these actions Three primary factors that influence a firm’s action or reaction: awareness, motivation, and capability Competitor Awareness – how mindful a company is of its competitor’s actions Competitor Motivation - to the incentives that an organization has to take action Competitor Capability - a firm’s ability to undertake an action  Thank you