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Definition
Systematic process of determining goals to be achieved in the foreseeable future. It
consists of: (1) Management's fundamental assumptions about the future economic,
technological, and competitive environments. (2) Setting of goals to be achieved within
a specified timeframe. (3) Performance of SWOT analysis. (4) Selecting main and
alternative strategies toachieve the goals. (5) Formulating, implementing,
and monitoring the operational or tactical plans to achieve interim objectives.
Read more: http://www.businessdictionary.com/definition/corporate-strategic-planning.html#ixzz4CDpoIGDe
Strategic Planning
Change is an essential component of strategic planning. This involves moving the organization or
program forward to create or change something. Some plans are created out of the need for the
organization to move in a certain direction, and other plans develop organically. Mission and vision
statements will be important to help communicate the goals of the plan to employees and the public.
Mission Statement
Leaders should emphasize the current mission statement to employees, which clarifies the purpose and
primary, measurable objectives of the organization. A mission statement is meant for employees and
leaders of the organization. Strategic plans may involve changing the mission statement to reflect a new
direction of the organization. Highlighting the benefits of the change and minimizing the deficits will help
employees and the public buy into the change.
Vision Statement
Like mission statements, vision statements help to describe the organization's purpose.
Vision statements also include the organization values. Vision statements give direction for
employee behavior and helps provide inspiration. Strategic plans may require a marketing
strategy, which could include the vision statement to also help inspire consumers to work
with the organization.
Considerations
A successful change will involve communicating and repeating mission and vision
statements, which helps prevent people from becoming discouraged in the event of small
failures along the way. Leaders should continue to highlight the strengths of the strategic
plans and involve important stakeholders in the process. Engaging employees and
volunteers will help them to recognize and take ownership of the change. Involving
employees also helps to provide more minds to prevent possible problems.
First, mission and vision provide a vehicle for communicating an organizations purpose and values
to all key stakeholders. Stakeholders are those key parties who have some influence over the
organization or stake in its future. You will learn more about stakeholders and stakeholder analysis
later in this chapter; however, for now, suffice i
Involvement
Strategic implementation of any kind of new company policy or program requires participation from all of
the departments that will be affected. Company leadership needs to identify what those departments are
and create an implementation team that consists of representatives from each affected group.
Management needs to create a structure that identifies various group leaders, the responsibilities of those
group leaders and an accountability system that insures that the implementation team meets its timetable
for getting the new program or policy in place.
Interest
Implementing change or any new strategy within a company requires a feeling of urgency on the part of
the entire company. It is the job of management to create that urgency by explaining to the staff why the
implementation is necessary. Leadership needs to help the employees understand how the company
benefits from the new implementation, but it also needs to get the organization to see the setbacks of not
making a change.
Monitoring
Strategic implementation within a company is not an exact process. It is a dynamic procedure that needs
to be monitored by management and altered to meet implementation goals. It is the responsibility of
leadership to put a monitoring system in place, analyze the data that is being generated during the
implementation and make any necessary changes to make the implementation more efficient.
Next Step
Implementing a corporate strategy or change is often done in phases. The company leadership needs to
be able to identify when each phase of a strategic implementation is complete and be ready to transition
the company to the next phase. For example, if the company is bringing in a new software program for
customer management, then the first phase of the program may be to implement it in the sales
department. Management needs to identify when the proper alterations to the software have been made
that will allow it to be implemented in other parts of the company.
Author of the Smart & Fast mini-course "Strategic
Management"
corporate level
While strategy may be about competing and surviving as a firm, one can argue that
products, not corporations compete, and products are developed by business units. The
role of the corporation then is to manage its business units and products so that each is
competitive and so that each contributes to corporate purposes.
Consider Textron, Inc., a successful conglomerate corporation that pursues profits
through a range of businesses in unrelated industries. Textron has four core business
segments:
Finance - 4% of revenues.
While the corporation must manage its portfolio of businesses to grow and survive, the
success of a diversified firm depends upon its ability to manage each of its product
lines. While there is no single competitor to Textron, we can talk about the competitors
and strategy of each of its business units. In the finance business segment, for
example, the chief rivals are major banks providing commercial financing. Many
managers consider the business level to be the proper focus for strategic planning.
Reach - defining the issues that are corporate responsibilities; these might
include identifying the overall goals of the corporation, the types of businesses in
which the corporation should be involved, and the way in which businesses will
be integrated and managed.
Corporations are responsible for creating value through their businesses. They do so by
managing their portfolio of businesses, ensuring that the businesses are successful
over the long-term, developing business units, and sometimes ensuring that each
business is compatible with others in the portfolio.
Recommended Reading
Mintzberg, Henry, Lampel, J., Ahlstrand, B., Strategy Safari: A Guided Tour through the Wilds of Strategic
Management
Strategy Safari organizes the seemingly disconnected aspects of strategic management into 10 different
schools of thought. For example, the basic strategic planning model that was popular in the 1970's is part
of The Planning School, and Michael Porter's theories are part of The Positioning School. Strategy
Safari provides an overview of each school and presents a balanced view of each, including advantages
and disadvantages. Because of its comprehensive and insightful approach,Strategy Safari presents an
excellent overview of the field of strategic management.
Mission &
Objectives
Environmental
Scanning
Strategy
Formulation
Strategy
Implementation
Evaluation
& Control
The mission statement describes the company's business vision, including the
unchanging values and purpose of the firm and forward-looking visionary goals that
guide the pursuit of future opportunities.
Guided by the business vision, the firm's leaders can define measurable financial and
strategic objectives. Financial objectives involve measures such as sales targets and
earnings growth. Strategic objectives are related to the firm's business position, and
may include measures such as market share and reputation.
Environmental Scan
The internal analysis can identify the firm's strengths and weaknesses and the external
analysis reveals opportunities and threats. A profile of the strengths, weaknesses,
opportunities, and threats is generated by means of a SWOT analysis
An industry analysis can be performed using a framework developed by Michael Porter
known as Porter's five forces. This framework evaluates entry barriers, suppliers,
customers, substitute products, and industry rivalry.
Strategy Formulation
Given the information from the environmental scan, the firm should match its strengths
to the opportunities that it has identified, while addressing its weaknesses and external
threats.
To attain superior profitability, the firm seeks to develop a competitive advantageover its
rivals. A competitive advantage can be based on cost or differentiation. Michael Porter
identified three industry-independent generic strategies from which the firm can choose.
Strategy Implementation
Cashflow Implications
for Growing Businesses
The growth of your business should have a positive impact as it implies that you may be
increasing profits, increasing market share, employing more staff, buying or leasing
larger premises, expanding your product range or even gaining a better reputation.
These are great outcomes and if managed correctly your business will thrive. Managed
poorly, you run the risk of insolvency and your business could fail.
Any growth should be planned and reflected in budgets including your
cashflow forecast. Your profit and loss budget is used to manage the
revenue and expenditure whereas the cashflow is used to forecast the timing
of the payments and receipts. Therefore, when planning your growth you
should be clear what it is you are going to be doing, how you are going to do
it and when you are going to do it.
You need to be very clear about the costs that will be incurred and when they will be
paid, as well as when you expect income to be received. Some important factors you
need to be mindful of when planning for growth are:
Do my debtors pay on time or are they slow to pay ? For example, you may have 14
day terms but do you receive payment on time?
How much is spent on wages and associated staff costs for each dollar of income?
When purchasing capital assets do you use cash when it may be better to use other
forms of finance such as a loan, lease or even to hire?
Do we have the right levels of stock? Too much stock or not enough stock can result in
additional costs and impact on cashflow especially if there are seasonal factors influencing this.
How much work do we have in progress at any one time causing delays in billing?
Managing work in progress can be difficult but sometimes it is better to complete a job before
commencing a new one as you can send your account and receive payment sooner.
In addition, we recently discussed in a post titled KPIs are Here the 14 standard
accounting ratios that are now included in Calxa Premier and Calxa Express. These can
be used to monitor some of the above factors. For example, you may benefit from
managing your Wages to Turnover, Debt Ratio or the Working Capital Ratio as part of
this process.
Calxa has contributed to the success of Green Eggs, says Shelley Green. "We have
had rapid growth in the past 10 years, with substantial capital improvements. Cashflow
is important to us, and Calxa helps monitor this very easily, and also lets us establish
what level of borrowing we may require for any further capital works. We can easily
produce scenarios for our lenders, to demonstrate that we have the capacity to service
our loans. With Calxa we are able to produce up-to-date reports and an analysis of our
actuals versus what we had budgeted."
If you are planning to borrow funds from a lending organisation then another benefit of
preparing your cashflow forecast for growth is that it shows the lender how well you
know your business. As a result, the lending organisation is more likely to lend you the
funds and you may be able to negotiate a better deal with reduced costs. This was
highlighted in our case study on Herb Booth where the Founder & CEO, Chris Booth
discussed how the Calxa software helped when applying for a bank loan. In relation to
the presentation and accuracy of the cashflow forecast Chris stated The fact that they
married up with the Profit & Loss and Balance Sheet reports from MYOB certainly
impressed them.. Chris also discussed the importance of being able to foresee in
advance when cashflow will be short and how he can take action and stated Just this
week I saved $5,000 by reviewing my expenses and changing one of my suppliers. I
wouldnt have been prompted to do that if I hadnt been using Calxas cashflow
forecast.
Your budget and cashflow forecast should clearly incorporate the elements of the
growth and when they are likely to occur so you can monitor and avoid surprises. This
allows you to actively manage your business and make considered and informed
decisions as they are needed. This will give you greater control and confidence with the
growth of your business without it adversely impacting on the viability of your business.
assessing suitability
positioning
Example: You may have a bond fund that is not doing as well as your stock funds. However,
you may decide to keep it because it provides balance to your entire portfolio and helps reduce
your overall risk. Depending on market conditions, you may find that your stock funds are
suddenly down, but your bond fund is now providing the counterbalancing strength. Likewise,
you may turn down buying a "hot tip" stock because the risk is too high and the purchase
would not fit within your portfolio strategy.
Example: You may prefer stocks and shares for their greater potential,
but you still wish to diversify in such a way as to reduce risk. You have
shares in an airline but the problem is that as the price of oil goes up the
airline profits go down and so do their share values. In this case it would not make sense to
buy shares in a second airline; it would make more sense to buy shares in an oil company.
This way when oil is in short supply, the price goes up and so do the value of oil company
shares offsetting the fall in value of the airline shares. The point is that you need to identify
the underlying drivers affecting your goals, in this case, the price of oil.
In more recent times, this same "portfolio management" concept has become popular as a
way to manage business investments. At a high-level, many of the same concepts are
involved. You have a limited amount of money to apply to your business. You want to manage
this money as a portfolio to maximize the overall value and to allow you to reach your goals. A
portfolio management process provides a way to select, prioritize, authorize and manage the
totality of work in the organization or individual department. This includes work that has been
completed, work in-progress and work that has been approved for the future. Further, it helps
you come up with the baseline that you can subsequently use to measure how well you are
managing the portfolio to meet the department's needs.
Financial portfolio management does not focus on costs, since the assumption is that
expenditures will result in the purchase of an asset (stocks, bonds, etc.) or a service (trading
fee, investment advice, etc.). Likewise, when you manage your work as a portfolio, you
change the emphasis from the costs of each portfolio component to the value provided. If the
value (and alignment) is right, the work will get authorized. If the value is not there, the work
should be eliminated, cut or backlogged.
On some websites, you will find links to order books. On others, you find a professor's notes
from a college class. Many others will offer consulting help. On this PortfolioStep website, you
will find most of what you need to successfully establish and manage portfolios of work.
Organizations of all sizes can use PortfolioStep. Smaller business units and departments will
not use all of the processes and features offered. Larger organizations will be able to use much
more. The larger and more sophisticated your unit or department is, the more material from
PortfolioStep you can leverage. After reviewing the PortfolioStep processes and templates, you
will agree that the content is unique and provides a more comprehensive picture that is not
found anywhere else.
7S Model
DuPont Analysis (also known as the dupont identity,DuPont equation, DuPont Model or
the DuPontmethod) is an expression which breaks ROE (return on equity) into three parts. The
name comes from theDuPont Corporation that started using this formula in the 1920s.
Marketing
accounts payable
accounts receivable
production
sales
human resources
If you want to increase your clients, and other areas that they may
be focused on in yourbusiness, then that means you need to
supervise every area and aspect and focus on what they are doing.
ENVIRONMENT
INTRODUCTION
Strategic analysis is basically concerned with the structuring of the relationship
between a business and its environment. The environment in which business operates
has a greater influence on their successes or failures. There is a strong linkage
between the changing environment, the strategic response of the business to such
changes and the performance. It is therefore important to understand the forces of
external environment the way they influence this linkage. The external environment
which is dynamic and changing holds both opportunities and threats for the
organisations. The organisations while attempting at strategic realignments, try to
capture these opportunities and avoid the emerging threats. At the same time the
changes in the environment affect the attractiveness or risk levels of various
investments of the organizations or the investors.
VALUE CHAIN
Scenario Planning
Traditional forecasting techniques often fail to predict significant changes in the firm's
external environment, especially when the change is rapid and turbulent or when
information is limited. Consequently, important opportunities and serious threats may be
overlooked and the very survival of the firm may be at stake. Scenario planning is a tool
specifically designed to deal with major, uncertain shifts in the firm's environment.
Scenario planning has its roots in military strategy studies. Herman Kahn was an early
founder of scenario-based planning in his work related to the possible scenarios associated
with thermonuclear war ("thinking the unthinkable"). Scenario planning was transformed
into a business tool in the late 1960's and early 1970's, most notably by Pierre Wack who
developed the scenario planning system used by Royal Dutch/Shell. As a result of these
efforts, Shell was prepared to deal with the oil shock that occurred in late 1973 and greatly
improved its competitive position in the industry during the oil crisis and the oil glut that
followed.
Scenario planning is not about predicting the future. Rather, it attempts to describe what is
possible. The result of a scenario analysis is a group of distinct futures, all of which are
plausible. The challenge then is how to deal with each of the possible scenarios.
Scenario planning often takes place in a workshop setting of high level executives, technical
experts, and industry leaders. The idea is to bring together a wide range of perspectives in
order to consider scenarios other than the widely accepted forecasts. The scenario
development process should include interviews with managers who later will formulate and
implement strategies based on the scenario analysis - without their input the scenarios may
leave out important details and not lead to action if they do not address issues important to
those who will implement the strategy.
Some of the benefits of scenario planning include:
Managers are forced to break out of their standard world view, exposing blind spots
that might otherwise be overlooked in the generally accepted forecast.
Decision-makers are better able to recognize a scenario in its early stages, should it
actually be the one that unfolds.
Managers are better able to understand the source of disagreements that often occur
when they are envisioning different scenarios without realizing it.
factor. For example, consider the extreme case in which a variable had a very large
range such that it might be rated a 10 on a scale of 1 to 10 for variation, but in
which the variable had very little impact on the firm so that the strength of impact
rating would be a 1. Multiplying the two together would yield 10 out of a possible
100, revealing that the variable is not highly critical. After performing this calculation
for all of the variables, identify the two having the highest significance.
6. Consider a few possible values for each variable, ranging between extremes while
avoiding highly improbable values.
7. To analyze the interaction between the variables, develop a matrix of scenarios using
the two most important variables and their possible values. Each cell in the matrix
then represents a single scenario. For easy reference in later discussion it is
worthwhile to give each scenario a descriptive name. If there are more than two
critical factors, a multidimensional matrix can be created to handle them but would
be difficult to visualize beyond 2 or 3 dimensions. Alternatively, factors can be taken
in pairs to generate several two-dimensional matrices. A scenario matrix might look
something like this:
Scenario Matrix
VARIABLE 1
Outcome 1A
|
V
V
A
R
I
A
B
L
E
Outcome 1B
|
V
Outcome 2A -->
Scenario 1
Scenario 2
Outcome 2B -->
Scenario 3
Scenario 4
One of these scenarios most likely will reflect the mainstream views of the future.
The other scenarios will shed light on what else is possible.
8. At this point there is not any detail associated with these "first-generation" scenarios.
They are simply high level descriptions of a combination of important environmental
variables. Specifics can be generated by writing a story to develop each scenario
starting from the present. The story should be internally consistent for the selected
scenario so that it describes that particular future as realistically as possible. Experts
in specific fields may be called upon to devlop each story, possibly with the use of
computer simulation models. Game theory may be used to gain an understanding of
how each actor pursuing its own self interest might respond in the scenario. The goal
of the stories is to transform the analysis from a simple matrix of the obvious range
of environmental factors into decision scenarios useful for strategic planning.
9. Quantify the impact of each scenario on the firm, and formulate appropriate
strategies.
Industry analysis