Strategic Management ppt (strategic planning ppt)

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Strategic Planning Strategic Planning for Managers for Managers


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ContentsContents

1.1. Five Tasks of Strategic PlanningFive Tasks of Strategic Planning

2.2. Factors Shaping the Choice of StrategyFactors Shaping the Choice of Strategy

3.3. Three Tests of Best Strategy Three Tests of Best Strategy

4.4. Analyzing Industry Environment and Crafting Analyzing Industry Environment and Crafting

Competitive StrategyCompetitive Strategy

5.5. Strategy Implementation and ExecutionStrategy Implementation and Execution


Five Tasks of Five Tasks of Strategic PlanningStrategic Planning


Five Tasks of Strategic PlanningFive Tasks of Strategic Planning

Forming a

strategic

vision

Setting

objectives

Crafting a

strategy to

achieve the

desired

outcomes

Implementing

and executing

the chosen

strategy

Evaluating

performance,

monitoring new

developments,

and initiating

corrective

adjustments


Forming a Strategic VisionForming a Strategic Vision

Forming a

strategic

vision

• Very early in the strategy-making

process, company managers need to

pose a set of questions:

• "What is our vision for the company

— where should the company be

headed, what should its future

technology-product-customer focus

be, what kind of enterprise do we

want to become, what industry

standing do we want to achieve in

five years?"


Setting ObjectivesSetting Objectives

Setting

objectives

• The purpose of setting objectives is

to convert managerial statements of

strategic vision and business mission

into specific performance targets —

results and outcomes the

organization wants to achieve.

• Setting objectives and then

measuring whether they are

achieved or not help managers track

an organization's progress.


Improve Cost Efficiency

Enhance Long-term Shareholder Value

Increase Revenue Growth

Enhance Brand Image

Build High Performance Products

Achieve Operational Excellence

Develop Strategic Competencies

Drive Demand through Customer

Relation Management

Manage Dramatic Growth through

Innovation

Implement GoodEnvironmental

Policy

Build Learning Culture

Expand Capabilities with Technology

Strategic Objectives in Four PerspectivesStrategic Objectives in Four Perspectives

Financial

Customer

Internal Process

Learning & Growth

Expand Market Share


Crafting StrategyCrafting Strategy

Crafting a

strategy to

achieve the

desired

outcomes

• A company's strategy represents

management's answers to such fundamental

business questions as :

• whether to concentrate on a single business or build

a diversified group of businesses

• whether to cater to a broad range of customers or

focus on a particular market niche

• whether to develop a wide or narrow product line

• how to respond to changing buyer preferences

• how big a geographic market to try to cover

• how to react to newly emerging market and

competitive conditions

• how to grow the enterprise over the long term.


What Does a Company's Strategy Consist Of?What Does a Company's Strategy Consist Of?

Crafting a

strategy to

achieve the

desired

outcomes

• Company strategies concern Company strategies concern how: how:

• how to grow the business

• how to satisfy customers

• how to outcompete rivals

• how to respond to changing market

conditions

• how to manage each functional piece of

the business and develop needed

organizational capabilities

• how to achieve strategic and financial

objectives


Strategy Implementation and ExecutionStrategy Implementation and Execution

• Strategy implementation concerns the

managerial exercise of putting a freshly

chosen strategy into place

• Strategy execution deals with the managerial

exercise of supervising the ongoing pursuit of

strategy, making it work, and showing

measurable progress in achieving the

targeted results.

Implementing

and executing

the chosen

strategy


Strategy Evaluation and MonitoringStrategy Evaluation and Monitoring

• It is management's duty to stay on top of

the company's situation, deciding

whether things are going well internally,

and monitoring outside developments

closely.

• Marginal performance or too little

progress, as well as important new

external circumstances, will require

corrective actions and adjustments.

Evaluating

performance,

monitoring new

developments,

and initiating

corrective

adjustments


Strategy HierarchyStrategy Hierarchy

Corporate

Strategy

Business

Strategies

Functional Strategies (R&D,

Marketing, Manufacturing, HR,

Finance, etc.

Operating Strategies (regions,

plants, departments within

functional areas)

Strategy Strategy

hierarchy for hierarchy for

a diversified a diversified

companycompany



Business

Strategies

Functional Strategies (R&D,

Marketing, Manufacturing, HR,

Finance, etc.

Operating Strategies (regions,

plants, departments within

functional areas)

Strategy hierarchy Strategy hierarchy

for for

a single-business a single-business

companycompany



Corporate Corporate

Strategic VisionStrategic Vision

Functional Functional

Areas VisionsAreas Visions

Operating Unit VisionsOperating Unit Visions

Business-Level Business-Level

Strategic VisionStrategic Vision

Corporate Corporate

Strategic ObjectivesStrategic Objectives


Areas ObjectivesAreas Objectives

Operating Unit Operating Unit

ObjectivesObjectives


Strategic ObjectivesStrategic Objectives

Corporate Corporate

Strategic StrategyStrategic Strategy


Areas StrategiesAreas Strategies

Operating Unit Operating Unit

StrategiesStrategies


StrategyStrategy


Factors Shaping Factors Shaping the Choice of Strategythe Choice of Strategy


Factors Shaping the Choice of StrategyFactors Shaping the Choice of Strategy

Economic, Economic,

societal, political, societal, political,

and government and government

regulationsregulations

Competitive Competitive

conditions and conditions and

industry industry

attractivenessattractiveness

Company Company

opportunity and opportunity and

threatthreat

Company strengths Company strengths

and weaknesses, and weaknesses,

competencies and competencies and

capabilitiescapabilities

Personal ambitions Personal ambitions

and business and business

philosophies of key philosophies of key

executivesexecutives

Shared values and Shared values and

company culturecompany culture

External FactorsExternal Factors

Internal FactorsInternal Factors

The mix of considerations that determines

a company’s strategic situation



Economic, Economic,

societal, political, societal, political,

and government and government

regulationsregulations

• What an enterprise can and cannot do

strategywise is always constrained by

what is legal, by what complies with

government policies and regulatory

requirements, by what is considered

ethical, and by what is in accord with

societal expectations and the standards

of good social and community

citizenship.



• An industry's competitive conditions

and overall attractiveness are big

strategy-determining factors.

• A company's strategy has to be tailored

to the nature and mix of competitive

factors in play—price, product quality,

performance features, service, war

ranties, and so on.

Competitive Competitive

conditions and conditions and

industry industry

attractivenessattractiveness



• A company's strategy needs to be

deliberately aimed at capturing its best

growth opportunities, especially the

ones that hold the most promise for

building sustainable competitive

advantage and enhancing profitability.

• Strategy should also provide a defense

against external threats to the

company's well-being and fu ture

performance.

Company Company

opportunity and opportunity and

threatthreat



• One of the most pivotal strategy-shaping

internal considerations is whether a

company has or can acquire the

resources, competencies, and capabilities

needed to execute a strategy proficiently.

• The best path to competitive advantage is

found where a firm has competitively

valuable resources and competencies,

where rivals can't develop comparable

capabilities except at high cost or over an

extended period of time.

Company Company

strengths and strengths and

weaknesses, weaknesses,

competencies and competencies and

capabilitiescapabilities



• Managers do not dispassionately assess

what strategic course to steer.

• Their choices are typically influenced by

their own vision of how to compete and

how to position the enterprise and by what

image and standing they want the

company to have.

Personal Personal

ambitions and ambitions and

business business

philosophies of philosophies of

key executiveskey executives



• An organization's policies, practices,

traditions, philosophical beliefs, and ways

of doing things combine to create a

distinctive culture.

• The stronger a company's culture, the

more that culture is likely to shape the

company's strategic actions, sometimes

even dominating the choice of strategic

moves.

Shared values Shared values

and company and company

cultureculture


Strategic Analysis and Strategic ChoicesStrategic Analysis and Strategic Choices

Analyzing Analyzing

strategically strategically

about industry about industry

and competitive and competitive

conditionsconditions

Analyzing Analyzing


about a about a

company’s own company’s own

situationsituation

What strategic What strategic

options does the options does the

company company

realistically realistically

have?have?

What is the best What is the best

strategy?strategy?



Analyzing Analyzing


about industry about industry

and competitive and competitive

conditionsconditions

The Key Questions

• What are the industry’s dominant economic

features?

• What is causing the industry’s competitive

structure and business environment to change?

• Which companies are in the strongest/weakest

positions?

• What strategic moves are rivals likely to make

next?

• What are the key factors for competitive success?

• Is the industry attractive and what are the

prospects for above-average profitability?



Analyzing Analyzing


about a about a

company’s own company’s own

situationsituation

The Key Questions

• How well is the company’s present

strategy working?

• What are the company’s strengths,

weaknesses, opportunities, and threats?

• Are the company’s prices and costs

competitive?

• How strong is the company’s competitive

position?

• What strategic issues does the company

face?


Three Tests of Best StrategyThree Tests of Best Strategy

The The Performance Performance

TestTest

The The Competitive Competitive Advantage Advantage

TestTest

The The Goodness of Goodness of

Fit TestFit Test

The Best The Best

StrategyStrategy


• A good strategy has to be well matched

to industry and competitive conditions,

market opportunities and threats, and

other aspects of the enterprise's

external environment.

• At the same time, it has to be tailored to

the company's resource strengths and

weaknesses, competencies, and

competitive capabilities.

Three Tests of Best StrategyThree Tests of Best StrategyThe The

Goodness of Goodness of Fit TestFit Test


• A good strategy leads to sustainable

competi tive advantage.

• The bigger the competitive edge that

a strategy helps build, the more

powerful and effective it is.


Competitive Competitive Advantage Advantage

TestTest


• A good strategy boosts company

performance.

• Two kinds of performance

improvements are the most telling of

a strategy's caliber: gains in

profitability and gains in the

company's competitive strength and

long-term mar ket position.


Performance Performance TestTest


Analyzing Industry Environment Analyzing Industry Environment

and Designing Competitive Strategyand Designing Competitive Strategy


Porter’s Five ForcesPorter’s Five Forces

RivalryRivalry

Buyer Buyer PowerPower

Supplier Supplier PowerPower

Threats of Threats of SubstitutesSubstitutes

Barriers to Barriers to EntryEntry


The Intensity of RivalryThe Intensity of Rivalry

1. A larger number of firms

2. Slow market growth

3. High fixed cost

4. High storages costs or highly

perishable products

5. Low switching cost

6. Low level of product differentiation

7. Strategic stakes are high

8. High exit barriers

9. A diversity of rivals

10. Industry shakeout

The intensity of

rivalry is influenced

by the following

industry

characteristics:


Barriers to EntryBarriers to Entry

Entry barriers

are influenced by

the following

factors :

1. Absolute cost advantages

2. Proprietary learning curve

3. Access to inputs

4. Government policy

5. Economies of scale

6. Capital requirements

7. Brand identity

8. Switching costs

9. Access to distribution

10. Expected retaliation

11. Proprietary products


Threats of SubstitutesThreats of Substitutes

Threats of

substitutes

are influenced by

the following

factors :

1. Switching costs

2. Buyer inclination to

substitute

3. Price-performance trade-off

of substitutes


Buyer PowerBuyer Power

Buyer power

is influenced by

the following

factors :

1. Bargaining leverage

2. Buyer volume

3. Buyer information

4. Brand identity

5. Price sensitivity

6. Threat of backward integration

7. Product differentiation

8. Buyer concentration vs. industry

9. Substitutes available

10. Buyers' incentives


Supplier PowerSupplier Power

Supplier power

is influenced by

the following

factors :

1. Supplier concentration

2. Importance of volume to supplier

3. Differentiation of inputs

4. Impact of inputs on cost or

differentiation

5. Switching costs of firms in the

industry

6. Presence of substitute inputs

7. Threat of forward integration

8. Cost relative to total purchases

in industry


Dominant Economic Characteristics of the Industry Environment (market size and growth rate,

geographic scope, number and sizes of buyers and sellers, pace of technological change and

innovation, scale economies, experience curve effects, capital requirements, and so on)

Competitive Analysis Rivalry among competing sellers Threat of potential entry Competition from substitutes Power of suppliers Power of consumers

Competitive Position of Major Companies/ Strategic Groups. Those that are favorably positioned, and why Those that are unfavorably positioned, and why

Competitor Analysis Strategic approaches/predicated moves of key competitors Whom to watch, and why

Industry Key Success Factors

Industry Prospects and Overall Attractiveness Factors making the industry attractive Factors making the industry unattractive Special industry issues/problems Profit outlook (favorable/unfavorable)

Sample Form for an Industry and Competitive Analysis SummarySample Form for an Industry and Competitive Analysis Summary


Five Generic Competitive StrategiesFive Generic Competitive Strategies

Overall Low Cost

Leadership Strategy

Overall Low Cost

Leadership StrategyDifferentiation

Strategy

Differentiation

Strategy

Focused Low Cost

Strategy

Focused Low Cost

StrategyFocused

Differentiation

Strategy

Focused

Differentiation

Strategy

Low CostLow CostLow CostLow Cost DifferentiationDifferentiationDifferentiationDifferentiation

Broad Market Broad Market SegmentSegment

Narrow Market Narrow Market SegmentSegment

Best Cost Strategy



Overall Low Cost

Leadership

Strategy

Overall Low Cost

Leadership

Strategy

Broad

Differentiation

Strategy

Broad

Differentiation

Strategy

Appealing to a broad spectrum of customers

based on being the overall low-cost provider

of product and service

A differentiation strategy calls for the

development of a product or service that

offers unique attributes that are valued by

customers and that customers perceive to

be better than or different from the products

of the competition



Best Cost StrategyBest Cost Strategy • Giving customers more value for the

money by incorporating good-to-

excellent product attributes at a lower

cost than rivals

• The target is to have the lowest (best)

costs and prices compared to rivals

offering products with comparable

upscale attributes


Generic Strategies and Industry ForcesGeneric Strategies and Industry Forces

IndustryForce

Generic Strategies

Cost Leadership Differentiation Focus

EntryBarriers

Ability to cut price in retaliation deters potential entrants.

Customer loyalty can discourage potential entrants.

Focusing develops core competencies that can act as an entry barrier.

BuyerPower

Ability to offer lower price to powerful buyers.

Large buyers have less power to negotiate because of few close alternatives.

Large buyers have less power to negotiate because of few alternatives.

SupplierPower

Better insulated from powerful suppliers.

Better able to pass on supplier price increases to customers.

Suppliers have power because of low volumes, but a differentiation-focused firm is better able to pass on supplier price increases.

Threat ofSubstitutes

Can use low price to defend against substitutes.

Customer's become attached to differentiating attributes, reducing threat of substitutes.

Specialized products & core competency protect against substitutes.

RivalryBetter able to compete on price.

Brand loyalty to keep customers from rivals.

Rivals cannot meet differentiation-focused customer needs.


Strategy Implementation and Strategy Implementation and ExecutionExecution


Strategy ImplementationStrategy Implementation

Building a capable

organization

Designing strategy-

supportive reward system

Creating a strategy-

supportive corporate

culture

Exerting strategic

leadership

Linking budget to strategy

Establishing strategy-

supportive policies and

procedures

Instituting best practices and

commitment to continuous

improvement

Installing information system

to support strategy execution

HR & Organization HR & Organization Development FactorDevelopment Factor

System FactorSystem Factor

Effective

Strategy

Execution


Building a Capable OrganizationBuilding a Capable Organization

Building a Building a

capable capable

organizationorganization

Building a Building a

capable capable

organizationorganization

Staffing the organizationStaffing the organization• Putting together a strong management team• Recruiting and retaining talented employees

Staffing the organizationStaffing the organization• Putting together a strong management team• Recruiting and retaining talented employees

Building Core Competencies and Capabilities Building Core Competencies and Capabilities • Developing competence/capability portfolio

suited to current strategy • Updating and reshaping the portfolio as external

conditions and strategy change

Building Core Competencies and Capabilities Building Core Competencies and Capabilities • Developing competence/capability portfolio

suited to current strategy • Updating and reshaping the portfolio as external

conditions and strategy change

Structuring the Organization and Work Effort Structuring the Organization and Work Effort • Organizing business function and processes,

value chain activities, and decision making

Structuring the Organization and Work Effort Structuring the Organization and Work Effort • Organizing business function and processes,

value chain activities, and decision making


Strategy-supportive Reward SystemStrategy-supportive Reward System

Designing Designing

strategy-strategy-

supportive supportive

reward reward

systemsystem

• Strategy-supportive motivational practices

and reward systems are powerful

management tools for gaining employee

buy-in and commitment.

• The key to creating a reward system that

promotes good strategy execution is to

make strategically relevant measures of

performance the dominating basis for

designing incentives, evaluating individual

and group efforts, and handing out

rewards.


Strategy-supportive Corporate CultureStrategy-supportive Corporate Culture

Creating a Creating a

strategy-strategy-


corporate corporate

cultureculture

• Building a strategy-supportive culture is

important to successful strategy execution

because it produces a work climate and

organizational esprit de corps that thrive

on meeting performance targets and

being part of a winning effort.


Strategic LeadershipStrategic Leadership

Exerting Exerting

strategic strategic

leadershipleadership

• Strategic leaders encourage people to be

innovative in order to keep the

organization responsive to changing

conditions, alert to new opportunities, and

anxious to pursue fresh initiatives.

• Strategic leaders also actively push

corrective actions to improve strategy

execution and overall strategic

performance.


Linking Budget to StrategyLinking Budget to Strategy

Linking Linking

budget to budget to

strategystrategy

• Reworking the budget to make it more

strategy-supportive is a crucial part of the

implementation process because every

organization unit needs to have the

people, equipment, facilities, and other

resources to carry out its part of the

strategic plan.


Strategy-supportive PolicyStrategy-supportive Policy

Establishing Establishing

strategy-strategy-


policies and policies and

proceduresprocedures

• Prescribing new or freshly revised policies

and operating procedures aids the task of

implementation (1) by promoting

consistency in how particular strategy-

critical activities are performed in

geographically scattered operating units

and (2) by helping to create a strategy-

supportive work climate and corporate

culture.


Continuous Improvement Continuous Improvement

Instituting Instituting

best practices best practices

and and

commitment commitment

to continuous to continuous

improvementimprovement

• Competent strategy execution entails

visible, unyielding managerial commitment

to best practices and continuous

improvement.

• Benchmarking, the discovery and

adoption of best practices, and six sigma

initiatives all aim at improved efficiency,

better product, and greater customer

satisfaction.


Information Support System Information Support System

Installing Installing

information information

system to system to

support support

strategy strategy

executionexecution

• Company strategies can’t be implemented

well without a number of support system

to carry on business operations.

• Well-conceived, state-of-the-art support

system not only facilitate better strategy

execution but can also strengthen

organizational capabilities enough to

provide a competitive edge over rivals.


Reference/Recommended Further ReadingReference/Recommended Further Reading

• Arthur Thompson and A.J. Strickland III, Strategic

Management : Concept and Cases, McGraw-Hill. You can obtain this excellent book at this link :

http://www.amazon.com/Strategic-Management-Concepts-Arthur-Thompson/dp/0072443715/ref=sr_1_3?ie=UTF8&s=books&qid=1219804406&sr=1-3


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Strategic Management ppt (strategic planning ppt)

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