Planning & Strategic Management

What is Strategy? A Strategy is a comprehensive plan for accomplishing an organizations goals. A Strategy is a plan or a course of action which is of vital, pervasive or continuing importance to the organization as a whole. A procedure to identify success from failure. A strategy is the starting point for developing a detailed action plan, but it transcends the specifics of any particular plan.

Formulating Strategy
The Planning Process

MISSION DETERMINATION ------------------------------Deciding what is intended to be accomplished (purpose) For whom (constituents)

VISION DETERMINATION ------------------------------Desired future state - The aspirational view

ENVIRONMENTAL ASSESSMENT ------------------------Determining external conditions (Threats & Opportunities)

OBJECTIVE/ GOAL SETTING -----------------------Outlining very specific aims and wants

STRATEGY SETTING ---------------------Specifying corporate level strategies or procedures

ORGANIZATION ASSESSMENT ------------------------Determining internal competencies (Strengths & Weaknesses)

Example
Concept Mission Definition Over-riding purpose in line with the values or expectations of stake holders Example: British Airways British Airways is aiming to set new industry standards in customer service and innovation, deliver the best financial performance and evolve from being an airline to a world travel business with the flexibility to stretch its brand into new business areas To become the undisputed leader in world travel by ensuring that BA is the customers first choice through the delivery of an unbeatable travel experience To be a good neighbour, concerned for the community and the environment, to provide overall superior service and good value for money in every market segment in which we compete, to excel in anticipating and quickly responding to customer needs and competitor activity. Continuing emphasis on consistent quality of customer service and the delivery to the market place of value for money through customer- oriented initiatives (on line booking service, strategic alliances) and to arrange all the elements of our service so that they collectively generate a particular experience..building trust with our shareholders, employees, customers through commitment to good practice and societal reporting.

Vision

Desired future state: the aspiration of the organization (precise) statement of aims and purpose

Corporate Objectives & Goals

Strategies

The way or means in which the corporate objectives are to be achieved and put into effect

Initial Strategy Assessment Do you and your organizations leadership team truly understand your business strategy and how it relates to your industry? Do you and your organizations leadership team truly know your market niche and its market potential so effective growth strategies can be put in place? Does your mission statement clearly describe the purpose of your organization? Have you developed a compelling vision which pictures your desired future?

Have you put in place the strategies that will ensure both the mission and vision can be achieved?
Do you know your organizations strategic strengths? Do you know your organizations weaknesses? Have you set measurable, specific and time bound tactics and objectives to help ensure the organizations strategies can be attained? In addition to your primary strategies, have you determined alternative plans and selected the appropriate alternative strategies? Have you translated these strategies into action plans? Do you and organizational members know what major strategic achievement/s your organization will cite as a significant accomplishment in its annual report? Are organizational strategies clearly communicated to all members of the organization so all stakeholders can align their work activities accordingly?

Activity Coke
Our Mission Our Roadmap starts with our mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions. To refresh the world... To inspire moments of optimism and happiness... To create value and make a difference. Our Vision Our vision serves as the framework for our Roadmap and guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable, quality growth. People: Be a great place to work where people are inspired to be the best they can be. Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy people's desires and needs. Partners: Nurture a winning network of customers and suppliers, together we create mutual, enduring value. Planet: Be a responsible citizen that makes a difference by helping build and support sustainable communities. Profit: Maximize long-term return to shareowners while being mindful of our overall responsibilities. Productivity: Be a highly effective, lean and fast-moving organization.

activity contd; Objectives Focus on the Market Focus on needs of our consumers, customers and franchise partners Get out into the market and listen, observe and learn Possess a world view Focus on execution in the marketplace every day Be insatiably curious Work Smart Act with urgency Remain responsive to change Have the courage to change course when needed Remain constructively discontent Work efficiently Act Like Owners Be accountable for our actions and inactions Steward system assets and focus on building value Reward our people for taking risks and finding better ways to solve problems Learn from our outcomes -- what worked and what didnt Be the Brand Inspire creativity, passion, optimism and fun

Planning and Organizational Goals

Organizational Goals Purposes Kinds of Goals Mission, Strategic, Tactical and Operational Kinds of Organizational Plans i) Strategic, Tactical and Operational ii) Contingency Planning

Contingency Planning & Crisis Management (Y2K)

Ongoing Planning Process

Action point 1 Develop plan, considering contingency events

Action point 3 Action point 2 Implement plan and formally identify contingency events Specify indicators for the contingency events & develop contingency plans for each possible event Action point 4 Successfully complete plan or contingency plan

Monitor contingency event indicators and implement contingency plan if necessary

The Planning Process

The Environmental Context The Organizations Mission * Purpose * Premises * Value * Directions

Strategic Goals

Strategic Plans

Tactical Goals

Tactical Plans

Operational Goals

Operational Plans

Mission our mission is to operate a chain of restaurants that will prepare and serve high quality food on a timely basis and at reasonable prices Strategic Goals President and CEO Provide 14 % return to investors for at least 10 years Start or purchase new restaurant chain within five years Negotiate new labour contract in the current year. Tactical Goals
Vice President Operations Open 150 new restaurants in next 10 years Decrease food container costs by 15 % in the next 5 years Decrease average customer wait by 30 secs this year Vice President Marketing Increase per store sales 5% per year for next 10 years Target and attract two new market segments during next 5 years Develop new promotional strategy for next year Vice President Finance Keep corporate debt to no more than 200 % of liquid assets for next 10 years Revise computerized accounting system Earn 9% of excess cash this year

Operational Goals
Restaurant Manager Implement employee incentive system within one year Decrease waste by 5 % this year Hire and train new assistant manager Advertising Director Develop regional advertising campaigns within 1 year Negotiate 5% lower advertising rates next year Implement this years promotional strategy Accounting Manager Regularise all accounting functions Organise a proper and applicable payroll system Pay all invoices within 30 days

Tactical Planning

Developing Tactical Plans

Recognize and understand overarching strategic plans and tactical goals Specify relevant resource and time issues Recognize and identify human resource commitments

Executing Tactical Plans

Evaluate each course of action in light of its goal Obtain and distribute information and resources Monitor horizontal and vertical communication and integration of activities Monitor ongoing activities for goal achievement

Operational Planning
Two Basic Types of Operational Plans and specific type of each :-

Plan Single Use Plan

Program

Description Developed to carry out a course of action not likely to be repeated in the future
- Single Use Plan for a large set of activities eg:- a takeover - Single use plan of less scope and complexity than a program

Project

Standing Plan

Developed for activities that recur regularly over a period of time to enhance efficiency by making decision making a routine
- Standing plan specifying the organizations general response to a designated problem or situation - Standing plan outlining steps to be followed in particular circumstances - Standing plans describing exactly how specific activities are to be carried out

Policy Standard Operating Procedure Rules & Regulations

The Nature of Strategic Management

Components of Strategy Distinctive Competence something that the organization does exceptionally well Scope specifies the range of markets (products) in which an organization will compete Resource Deployment is how the organization will distribute its resources across the areas where it competes Types of Strategic Alternatives Corporate level Strategy what business are we in? - the set of strategic alternatives from which an organization chooses as it manages its operations simultaneously across several industries Business level Strategy- how do we compete? - the set of strategic alternatives from which an organization chooses as it conducts business in a particular industry or market Functional Strategy how do we support the business level competitive strategy?

Strategy Formulation ( lines of content) is the set of processes involved in creating or determining the strategies of the organization. This determines what the strategy is. Strategy Implementation (process mainly overcoming resistance) are the methods by which strategies are operationalized or executed within the organization. This focuses on how the strategy is achieved.

Establish the Grand Strategy

In the case of a startup after the mission, vision or else, even during revisiting the strategy in a running organization or product. The first process is to make a rigorous analysis of the organizations present situation to determine WHERE it is presently headed. The second part is to determine where it SHOULD be headed in the future

i) ii) iii) iv)

The Growth Strategy grand strategy that involves expansion as in sales revenues,
market share, number of customers

The Stability Strategy(pause strategy) grand strategy that involves little or no

significant change

The Defensive Strategy or a retrenchment strategy that involves reduction in the

organizations efforts

A mixture of the above

Formulating Corporate Level Strategies

The most important strategic issue at the corporate level is the extent and nature of diversification. Single Product strategy for single geographic market Related Diversification Unrelated Diversification

Implementing Corporate Level Strategies I. Becoming a Diversified Firm 1. Development of new products Diversifying by developing their own new products or services within the boundaries of their traditional business operations Use their strengths and resources into new business 2. Replacement of Suppliers and Customers Backward vertical integration Forward vertical integration 3. Mergers and Acquisitions To diversify through vertical integration by acquiring former suppliers or former customers To acquire complementary products or complementary services Main objective is the creation or exploitation of synergies Synergy reduces the cost of doing business, increase revenues and also make way for an entirely new business

Implementing Corporate Level Strategies

II. Managing Diversification 1. Organizational Structure 2. Portfolio Management Techniques a) BCG Matrix focuses on market growth and market share

High

STARS
Market Growth rate

Question Mark

Cash Cows
Low High

Dogs

Low

Relative Market share

Implementing Corporate Level Strategies

b) GE Business Screen This focuses on industry attractiveness and competitive position.

High

Winner
Winner Profit Producer
Good

Winner
Average Business Loser
Medium

Industry Attractiveness

Question Mark
Loser Loser
Poor

Medium Low

Competitive Position

Using SWOT Analysis to Formulate Business Level Strategy

Mission An organizations fundamental purpose

SWOT Analysis To formulate strategies that support the mission Internal Analysis External Analysis for competitive advantage Opportunities

Strengths (distinctive Competencies) Weaknesses

Threats

Good Strategies Those that support the mission and Exploit opportunities Neutralize threats Avoid weaknesses

Porters Five Forces of Competitive Position (Opportunities and Threats)

Threats of New Market Entrants, eg: entry ease/barriers geographical factors incumbents resistance new entrant strategy routes to market Bargaining Power of Suppliers; eg: brand reputation geographical coverage product/service level quality relationships with customers bidding processes/capabilities Bargaining Power of Customers; eg: buyer choice buyers size/number change cost/frequency product/service importance volumes, JIT scheduling

Competitive Rivalry/; eg: number and size of firms industry size and trends fixed variable cost bases product/service ranges differentiation, strategy

Threat of substitute products or services, eg: alternatives price/quality market distribution changes fashion and trends legislative effects

Formulating Business Level Strategies Three important classification schemes :a) Porters competitive / Generic Strategies :Wide markets applicable strategy types :i. Differentiation distinguish products or services reduce manufacturing and other costs Roles watches Nikon Camera Timex watches Toyota cars

ii. Overall cost leadership

Narrow markets strategy type:iii. Focus strategy concentrate on specific regional market, product market, or group of buyers Tag Heuer watches

Formulating Business Level Strategies b) Miles and Snow Typology :- identifies four strategic types of organizations. Three of these, the prospector, the defender, and the analyzer can all be effective in certain circumstances. The fourth type the reactor- represents an ineffective approach to strategy. Strategy Type Definition Examples Prospector Is innovative and growth oriented, searches for new markets and new growth opportunities, encourages risk taking Protects current markets, maintains stable growth, serves current customers Maintains current markets and current customer satisfaction with moderate emphasis on innovation 3M J&J

Defender

BIC Mrs Fields IBM; P&G

Analyzer

Reactor

No clear strategy, reacts to changes in the environment, drifts with events

Formulating Business Level Strategies c) Strategies based on Product Life Cycle

High Introduction Growth Maturity Decline

Sales Volume

Low Time

Implementing Business Level Strategies a) Implementing Porters Generic Strategies 1. Differentiation Strategy :- to support this strategy Marketing and sales must emphasize the high quality, high value image of the organizations products or services Accounts and finance departments should encourage the creativity needed to constantly develop new products and services to meet customer needs by allowing the flow of funds. If they keep track of and control the flow of money then differentiation strategy cannot be implemented effectively. Manufacturing department must emphasize quality and meeting specific customer needs rather than simply reducing costs The culture of the organization must also emphasize creativity, innovation and response to customer needs. 2. Overall Cost Leadership Strategy :Marketing and sales focus on single product attributes and how these product attributes meet customer needs in a low cost and effective manner. These organizations bank on advertising to a large extent. They emphasize on the value for money instead on the special features of the product or service Cost reduction is the primary focus Culture is about improvising marketing and sales of the products; bringing in profits

Implementing Business Level Strategies a) Implementing Porters Generic Strategies 3. Focus Strategy: Depending upon what the focus is on, the strategy is worked likewise. Marketing and sales should understand the region of sales or group of buyers perfectly. As in their habits, preferences, way of conducting etc. If the focus is on product line, creativity and innovation should be encouraged strategy should identify a unique selling proposition target market should be clearly defined and understood
Target Scope
Low Cost

Advantage
Product Differentiation

Broad Market Narrow Market

Cost Leadership Focus ( Low Cost)

Differentiation Focus ( Differentiation)