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Strategic Planning


Introduction to strategic planningConducting strategic planningPreparation for Strategic PlanningUseful Skills to Have When Strategic PlanningVision, mission and values statementsStrategic AnalysisForecasting –tools and methodsSetting Strategic Evaluating and selecting strategic alternativesWriting and Communicating the Plan

Outline


Strategic LeadersStrategic

management process

IntroductionStrategy

Formulation(planning)

Strategy Implementatio

n

Control of implementatio

n(evaluation

and monitoring)


Process to determine:Where are we now?Where do we want to be?How are we going to get there?How will we know if we got there?

A strategic plan is a document and result of the formal strategic planning phase.

Strategic Planning


Defining the organizations purpose

Establishing realistic goals and objectives

Communicating these goals

Focusing the organizations resources on key priorities

Defining baseline measurements

Building consensus

Provide clearer focus

Build strong teams of employees

Increase productivity

Solve major problems

Develop a sense of ownership of the plan

Why strategic planning?


When an organization is getting started, as part of the business plan, along with marketing, financial and operational plans

In preparation for a major new investment (for example: developing a new department or line of products)

At least once a year in time to identify organizational goals to be achieved next year.

When should strategic planning be done?

* During the implementation the progress should be reviewed

frequently and regularly.

* There is no one model that fits all, so the elected approach will

depend on the context of the organization.


Vision-Based (Goal-Based) Strategic PlanningIssues-Based PlanningAlignment ModelScenario PlanningReal-Time Planning

*can be used individually or in combination

Types of Strategic Planning


1• Identify your purpose (mission statement)

2• Establish a vision statements

3• Select the goals your organization must reach

4• Identify specific approaches

5• Identify specific action plans to implement each strategy

6• Compile the mission, vision, strategies, and action plans

in a Strategic Plan Document

7• Monitor the implementation of the Plan and update as

needed

Vision Based - steps


1• Identify the current, major issues facing the

organization

2• Brainstorm ideas to address each major issue

3• Compile the issues and ideas into a Strategic

Plan Document

4• Monitor the implementation of the Plan and

update as needed.

Issues Based


1

• Outline the organization’s mission, programs, resources, and needed support

2

• Identify what is working and what needs adjustment

3

• Identify how these adjustments should be made

4

• Include the adjustments as strategies in the strategic plan

Alignment Model


1• Select several external factors and imagine related

changes, which might influence the organization

2

• For each change in a force discuss three different future organizational scenarios (best, worst, and ok cases)

3• Suggest what the organization might do in each of these

three scenarios

4• Detect common strategies which could be addressed

5

• Select the most likely external changes and identify the most reasonable strategies the organization could take to respond.

Scenario Planning


Plan for a Plan Are we really ready for strategic

planning?Who is doing the planning?Why are you doing strategic

planning?What is the scope of our plan?What planning model should we

use?How might the model be

implemented?What is your schedule for

developing the plan?Who will be involved? How?

When?

Will you need an outside facilitator?

What materials will be needed?What terms/titles will you use?Will you need to train the planner

and if yes how?How will you get buy-in of

members of the organization?How will you ensure

implementation of the plan?

How will you change the plan as needed?


Creative Thinking

Decision Making

Problem Solving

Meeting Management

Facilitating in Face-to-Face Groups

Group-Based Problem Solving and Decision Making

Conflict Management in Groups

Skills for Strategic Planning


Vision: a compelling description either of where the organization will be after implementing its strategic plan or as an idealistic picture of the more general future

Vision, Mission, and Values Statements

Mission: what is the organization’s role in achieving the future outlined in the vision statement, should include

Whom does the organization serveWhich customer needs does it seek to satisfyWhat does it do to satisfy that need?

Values: Core of the organization’s culture, which should drive behavior of employees and management


• (B)PEST(LE)• Porters’ five forces analysis

External analysis

• Boston Consulting Group Portfolio Matrix

• McKinsey/ General Electric Portfolio Matrix

• Functional Analysis• Porters value chain

Internal analysis

• SWOT analysis• Stakeholders analysisCombined

Strategic Analysis


• what degree does the government intervene in the economy or the goods and services the government wants to supply or not.

Political factors-

• economic growth, interest/ exchange/inflation rates

Economic Factors:

• cultural aspects - trends in social factors have an affect on the demand for certain products.

Social Factors:

• technological aspects such as R&D activity• may determine barriers to entry, minimum

efficient production level and influence outsourcing decisions.

Technological Factors:

PEST Analysis


Expansion of the PEST analysis

• discrimination laws, consumer laws, anti-trust, these laws may affect how a company operates and the costs.

Legal factors

• ecological and environmental aspects (especially those impacting tourism or farming)

Environment Factors

• Demographic• RegulatoryOther factors:

PESTLE Analysis


Tool for understanding the dynamics of the industry

What are the drivers for competitors

Porter 5 Forces Analysis

Threat of new entrants

Threat of substitute products/ services

Bargaining power of customers

Bargaining power of suppliers

Intensity of competitive rivalry


Profitable markets will attract new entrants, increasing the number of competitors thus decreasing the profitability of all competitors in the industry– thus companies will have to pay attention to new entrants

If a company is new they should expect counter actions and design strategies to address this.

1. Threat of New Entrants


Referring to both products/services from another company and products that satisfy the same customer need, which doesn’t need to come from the same industry.

Factors influencing customers to substitute products are:level of product propensity to substitute, price for value ratio of substitute, switching costs, level of product differentiation, number of substitute products available in the market,the ease of substitution.

2. Threat of Substitute Products or Services


Ability of customers to condition the company.Based on how relevant the individual buyer is to the

companyCustomer buying power is strong if:

customers are concentrated or buy large amounts of the product,

if the products are standardized or non-differentiated,low switching costs for choosing an alternate product, the buyer has numerous alternatives, the buyer is price sensitive

3. Bargaining Power of Customers


Suppliers may be a source of power when: there are few substitutes, supplier switching costs are high, there is a high degree of inputs, there is a high impact of inputs on costs or differentiation,

low presence of substitutes,there is significantly more buyers than suppliers

4. Bargaining Power of Suppliers


Intensity is higher if: the competitors are numerous and/or relatively equal, there is weak economic growth, there are high fixed costs, there is a lack of differentiation or switching costs are low,there are high exit barriers.

5. Intensity of Competitive Rivalry


Stakeholders: individuals and structures within the organization and individuals and organizations in its environment that have an influence on the organization

Stakeholders Analysis

• STEPS

• Identify and classify the stakeholders

• Determine and analyze stakeholders interest

• Determine and analyze stakeholders potential influence

• Define priorities – by selecting stakeholders with highest influence on the strategy implementation• Determine ways of getting priority stakeholders on board for implementation of the strategy.


How well do the different aspects of the organization serve the strategy implementation. ‘Alignment’

Internal Analysis of the Organization

Tools for internal analysis• Boston Consulting Group Portfolio Matrix• McKinsey/ General Electric Portfolio Matrix• Functional Analysis• Porters value chain


Porters value chain model


Delphi Method

Scenario Method

Simulation Method.

Extrapolation of Trend

Regression Analysis

Brainstorming

Sensitivity Analysis

Forecasting- Tools and Methods


Setting Strategic Direction


SWOT Matrix

Strengths• What are your assets? Which is

strongest?• What differentiates you from your

competitors?• Is your business debt free or have a

better debt structure than your competitors?

• Do you have a broad customer base?• What unique resources do you have?• Do you have a sustainable competitive

advantage?

Weaknesses• What areas do you need to improve on?• What necessary expertise do you lack?• In what areas do competitors have an

edge?• Are you relying on one customer too

much?• Do you have adequate cash flow to

sustain you?• Do you have adequate profit levels?• Are you over leveraged (too much

debt)?

Opportunities• What external changes present

opportunities?• What trends might impact your

industry?• Is there talent elsewhere you might

acquire?• Is a competitor failing to service the

market?• Is there an unmet need/want you can

fulfill?• Are trends emerging you can profitably

service?

Threats• Is there a better competitor in your

market?• Is there an entity who may become a

competitor tomorrow?• Is your intellectual property secured?• What if your supplier runs out of

product and you experience an extended shortage?

• What if there is a natural disaster?, Customers go bankrupt?, your website is hacked?, or you get ‘sued?


TOWS Strategic Alternatives Matrix

External Opportunities (O)1.2.3.

External Threats (T)1.2.3.

Internal Strengths (S)1.2.3.

SO“Maxi-Maxi”

- use strengths to maximize opportunities

ST“Maxi-Mini”

- use strengths to minimize threats

Internal Weaknesses (W)1.2.3.

WO“Mini-Maxi”

-minimize weaknesses by taking advantage of

opportunities

WT“Mini-mini”

- minimize weaknesses and avoid threats


General strategic direction - survival and developmentBusiness strategy covers what the company produces, for whom, and how

it creates a competitive advantage?Two basic strategies:

Portfolio strategyCompetitive strategy

Besides a business strategy a company should also have Administrative andOperational plans

Basic requirements for success: long-term organizational objectives must have an upper hand on short-term, organizational level objectives must have an upper hand on the objectives of the

organizational parts.

Defining Possible Strategies


= Determine volume and direction of future business of the company.

Portfolio strategy

MARKET

PRODUCT

EXISTING NEW

EXISTING

Market penetration

- existing market with the existing

products

Product development -

existing market with new products

NEW

Market development

- new market with the existing products

Diversification - new market with

new products


Cost leadership

•producing with lower cost that the competitors

Differentiation

•of products and services on account of image, characteristics, technologies and sales methods, servicing...

Focus •on specific market or group of consumers within the market (niche strategy)

Competitive strategy


1 •Defining strategic alternatives

2 •Defining objectives in accordance with which the strategic alternative should be evaluated

3 •Estimating and valuating impact of each strategic alternative on objectives

4 •Comparing results of valuation and selecting strategic alternatives

Evaluating and Selecting Alternatives


Body of the Strategic Development Plan:Executive SummaryOrganizational DescriptionMission, Vision and Values Statements Goals and Strategies

Writing and Communicating the Plan


Situational Analysis DataBudget PlanningAction and/or operating planFinancial ReportsMonitoring and Evaluation of Plan

Provisional Elements and/or Appendices:

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Documents

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