Strategic Planning Unit 2
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Transcript of Strategic Planning Unit 2
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Unit 2
Strategy:
Strategic Planning Importance
Advantages
Strategic Versus Operational
Planning
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Good strategy and
good strategy executionare the most trustworthy signs
of good management.
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Strategy
Strategy, a word of military origin, refers to a plan of
action designed to achieve a particular goal.
Business strategy is a long term plan of actiondesigned to achieve a particular goal or set of goals or
objectives.
Strategy is management's game plan for strengthening
the performance of the enterprise.It states how business should be conduct to achieve
the desired goals. Without a strategy management has
no roadmap to guide them.
http://www.rapid-business-intelligence-success.com/why-is-goal-setting-so-important.htmlhttp://www.rapid-business-intelligence-success.com/why-is-goal-setting-so-important.html -
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Strategic Planning
A management tool to help the
organization do a better job
Focus energy and resources appropriately
Assess and adjust the organizations
direction in response to a changing
environment
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Strategic planning is a
disciplined effort to produce
fundamental decisions and
actions that shape and guide
what an organization is,what it does, and
why it does it.
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Importance of Strategic Planning
Strategic planning improves performance
Solve major issues at a macro level
Process to establish priorities on what you will
accomplish in the future
Forces you to make choices on what you willdo and what you will not do
Pulls the entire organization together around
a single game plan for execution
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How Strategic Planning Works
Planning involves:
Setting goals
Understanding what we do now
Predicting future scenarios
Determining the best responses to thefuture
Understanding and prioritizing
resources
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A Good Strategic Plan should . . .
Address critical performance issues
Create the right balance between what the
organization is capable of doing vs. what theorganization would like to do
Cover a sufficient time period to close the
performance gap
Visionary convey a desired future end state
Flexible allow and accommodate change
Guide decision making at lower levels
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Three Fundamental
Strategic Questions
Where are we currently?
Where do we want to be in the
future?
How will we get there?
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Strategic Planning Process
Situation Analysis
Developing the Plan Defining the Strategies
Implementing the Plan Monitoring & Evaluation
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Situation Analysis
Situation analysis involves assessing
the strategic fit between external
between opportunities, threats,weaknesses and strengths
Methods to do situation analysis
SWOT
TWOS
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The SWOT Framework
SWOT Analysis Framework
Environmental Scan
/ \
Internal Analysis External Analysis
/ \ / \Strengths Weaknesses Opportunities Threats
SWOT Matrix
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Strengths
A firm's strengths are its resources andcapabilities that can be used for developing acompetitive advantage. Examples of such
strengths include: Patents
Strong brand names
Good reputation among customers Cost advantages from proprietary know-how
Exclusive access to natural resources
Good access to distribution networks
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Weaknesses
The absence of certain strengths are aweakness. For example, the following may be
considered weaknesses: Lack of patent protection
A weak brand name
Poor reputation among customers High cost structure
Lack of access to best natural resources
Lack of access to key distribution channels
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Opportunities
The external environmental analysis may
reveal certain new opportunities for profit and
growth. Some examples of such opportunitiesinclude:
An unfulfilled customer need
Arrival of new technologies
Loosening of regulations
Removal of international trade barriers
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Threats
Changes in the external environmental alsomay present threats to the firm. Some
examples of such threats include:
shifts in consumer tastes away from the
firm's products emergence of substitute products
new regulations
increased trade barriers
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TOWS Matrix
TOWS
Analysis
Strengths Weaknesses
Opportunities S-OStrategies
W-O
Strategies
Threats S-TStrategies
W-T
Strategies
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S-O strategies pursue opportunities that fit
well the company's strengths.
W-O strategies overcome weaknesses topursue opportunities.
S-T strategies identify ways that the firm can
use its strengths to reduce its vulnerability toexternal threats.
W-T strategies make a defensive plan to
prevent the firm's weaknesses from making it
susce tible to external threats.
TOWS Matrix
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Developing the P;lans
Establishing the Vision , Mission, Goals.
Objectives and policies
Analyzing the environment
Demographic Environment
Technological
Sociocultural
Internal Organizational Analysis
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General Environment- Economic
Inflation rates
Interest rates
Trade deficits or surpluses
Budget deficits or surpluses
Personal savings rate
Business savings rates
Gross domestic product
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General Environment- Political
and Legal
Antitrust laws
Taxation laws
Deregulation philosophies
Labor training laws
Educational philosophies and
policies
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General Environment- Socio
cultyral
Women in the workplace
Workforce diversity
Attitudes about quality of worklife
Concerns about environment
Shifts in work and careerpreferences
Shifts in product and service
preferences
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General Environment-
TechnologicalProduct innovations
Applications of knowledge
Focus of private and
government-supported R&D
expenditures
New communication
technologies
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General Environment- Global
Important political eventsCritical global markets
Newly industrialize countries
Different cultural andinstitutional attributes
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Industry Environment
A set of factors that directly influences acompany and its competitive actions and
responses. Interaction among these factors determine
an industrys profit potential.
Threat of new entrants Power of suppliers
Power of buyers
Product substitutes
Intensity of rivalry
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Defining the strategies
Three types of corporate strategy known
as grand strategy are strategies are
Stability Strategy
Growth Strategy
Retrenchment strategy
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Grand Strategy: Growth
Growth can be promoted internally by
investing in expansion or externally by
acquiring additional business divisions- Internal growth - can include development
of new or changed products
- External growth - typically involvesdiversification businesses related to
current product lines or into new areas
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Growth Strategy
Two types
Concentration- concentration of resources on
product lines with more growth potential
Concentration can be
Vertical- Taking over a supplier
function
Horizontal- Taking over another firm
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Growth Strategy
Diversification- Diversification is a
form of corporate strategy for a
company. It seeks to increaseprofitability through greater sales volume
obtained from new products and new
markets
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Growth Strategy
Types of Diversification
Horizontal or related diversification
Strategy of adding related or similar
product/service lines to existing core
business, either through acquisition of
competitors or through internaldevelopment of new products/services.
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Growth Stratetigy
Horizontal or related diversification
Advantages
Opportunities to achieve economies of scaleand scope.
Opportunities to expand product offerings or
expand into new geographical areas.
Disadvantages of related diversification
Complexity and difficulty of coordinating
different but related businesses.
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Growth Strategy
Conglomerate or unrelated diversification
Firms pursue this strategy for several
reasons: Continue to grow after a core business has
matured or started to decline.
To reduce cyclical fluctuations in sales
revenues and cash flows.
Problems with conglomerate or unrelated
diversification:
Managers often lack expertise or knowledge
about their firms businesses.
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Grand Strategy: Stability
Stability, sometimes called a pause
strategy, means that the organizationwants
to remain the same size or
to grow slowly and in a controlled fashion
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Stability Strategy
Pause/ Processed with care Strategy- After
rapid growth a firm adopts this strategy to
consolidate on resources
No change Strategy- When future is
predicted as unchanging
Profit Strategies- When difficulties arepercieved as temporary
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Grand Strategy: Retrenchment
Retrenchment = the organization goes through aperiod of forced decline by either shrinking currentbusiness units or selling off or liquidating entire
businesses
Liquidation = selling off a business nit for the cashvalue of the assets, thus terminating its existence
Divestiture = involves selling off of businesses that nolonger seem central to the corporation
Implementing the PlanImplementing the Plan
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Implementing the Plan
Establish priorities
Consider the available resources IT, human,financial, physical environment, etc, in determining
the implementation period and the strategies to beimplemented
It is not necessary to tackle all the strategies at thesame time a phased approach is acceptable
Seek technical support in the planning andimplementation processes if the expertise is notavailable in-house
Acknowledge small gains in the process and sharethe achievements
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Monitoring & Evaluation
Periodic review of the implementation process
Obtain feedback from staff/clients/stakeholders
Provide regular feedback to major stakeholders,including staff
Document and communicate the lessons learnt
Acknowledge and share results - achievements andfailures
Continuous monitoring and review of objectivesRemember that the Strategic Managementprocess is a continuous cycle. It does not end.The real objective is continual improvement!
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Strategic Thinking
vs. Operational Planning An operational planning is a subset of
strategic work plan. It describes short-term
ways of achieving milestones and explainshow, or what portion of, a strategic plan will be
put into operation during a given operational
period, in the case of commercial application, a
fiscal year or another given budgetary term. An
operational plan is the basis for, and
justification of an annual operating budget
request..
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Benefits to Strategic Planning
Strategic planning allows people to feel in
control of their future along with an increased
confidence about stepping up toopportunities and managing threats.
Defines mission, vision & values
Establishes realistic goals, objectives &strategies
Ensures effective use of resources
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Benefits of Strategic Planning
Provides base to measure progress
Develops consensus on future direction
Builds strong teams
Solves major problems
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Benefits of Strategic Planning
Increased effectiveness
Increased efficiency
Improved understanding and better learning
Better decision making
Enhanced organizational capabilities
Improved communications and publicrelations
Increased political support
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If you dont know where youre
going, youre liable to wind up
someplace else!
-- Yogi Berra