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Topic 5 : Strategy and Strategic Planning

Lecturer: Zhu Wenzhong

Copyright 2002 by Harcourt, Inc. All rights reserved.

LEARNING GOALS

Key learning goals: The major purpose of this topic is to discuss the definition of strategy, the process of strategic planning, and the contingency plans in crisis management. State the definition of strategy State the three major types of strategy for a business State the general strategic planning process State the six types of crisis in a business State the contingency plans a business may develop to solve these crisis problems.

1. 2. 3. 4. 5.

Copyright 2002 by Harcourt, Inc. All rights reserved.

Strategy and Strategic Planning


-What is strategy?

Strategy formerly refers to planning and managing an operation for a particular purpose such as in a war. A businesss strategy is the pattern of decisions and actions that are taken by the business to achieve its goals. A business may have a variety of goals or objectives, but for many businesses, the major goal is to improve performance so that profits increase through designing and implementing strategies.

Copyright 2002 by Harcourt, Inc. All rights reserved.

Strategy and Strategic Planning -Types of strategy

Business strategy can be classified into several


types, such as: functional strategy, business strategy, and corporate strategy. Differences between these strategies can be seen as follows in the table:

Copyright 2002 by Harcourt, Inc. All rights reserved.

Table 5-1 Types of strategies


Type of strategy Functional strategy Brief explanations Strategies of the functional level developed to improve the efficiency of a business operations. It is also called operational strategy.
Plans a company uses to gain competitive advantage over competitors in a market. It is unlikely that a company can serve an entire market all the time. Therefore a company must decide which parts of the market to aim at and how to be different from competitors. Strategies aimed at the long-term development of the organization. For example, a company may consider where it will be in 10 years time and how it manages to get there.

Examples of such a strategy Marketing strategy HR strategy Production strategy R&D strategy
Cost leadership strategy Differentiation strategy Focus strategy Withdrawal strategy Market penetration strategy New product development strategy . Internal development strategy Takeover and merger strategy Strategic alliances .

Business strategy

Corporate strategy

Copyright 2002 by Harcourt, Inc. All rights reserved.

Strategy and Strategic Planning -Strategic Panning Process

Strategy of a business needs to be well


planned. Well-planned strategy is key to success. How to plan a strategy is an important issue to study. Generally speaking, there are a number of common stages when a business plans a strategy, which is illustrated in the following table:

Copyright 2002 by Harcourt, Inc. All rights reserved.

Strategy and Strategic Planning -Strategic Panning Process


Figure 5-1 The strategic planning process
Stage One: Setting goals and objectives

Stage Two: Internal and external analysis

Stage Three: Selecting a proper strategy

Stage Four: Implementing the strategy

Stage Five: Evaluating the strategy

Copyright 2002 by Harcourt, Inc. All rights reserved.

Strategy and Strategic Planning -Strategic Panning Process

Question for your critical thinking:


Refer to the above figure, could you please explain what managers need to do in each stage of the strategic planning process?

Copyright 2002 by Harcourt, Inc. All rights reserved.

Strategy and Strategic Planning -Elements of effective planning and strategy


To be effective, the strategic planning must have
1. 2. 3. 4. 5. 6.
the following characteristics: Focus on the clear purpose of a business. Vision or commonly shared and supported view by people. Satisfying the needs of customers and clients. Achievable timetable for the strategy, such as longer time for a corporate strategy. Flexible in plans, such as not too tight for people to follow the strategy. Suitable for the set goals to be achieved

Copyright 2002 by Harcourt, Inc. All rights reserved.

Strategy and Strategic Planning -Strategic Planning for Crisis

Importance:
Crisis (unexpected problems) may occur at times for a business. However, effective planning should reduce the impact of the crisis on a business. So companies often need to have some contingency plans or strategies to deal with unexpected conditions. Types of crisis: There are at least the following crisis which may take place in a business and which are explained in the following table:

Copyright 2002 by Harcourt, Inc. All rights reserved.

Table 5-3 Types of crisis and their causes


Types of crises for a company Possible causes for the crisis

Financial crises

Lack of working capital to pay its debt Lack of money to pay salary Unable to collect large amount of money owed to the business Breakdown of machines Fire damages to the stock of raw materials Failure to deliver products or goods to the buyer on time Inferior quality products produced Employee strike High level of staff turnover Poor staff motivation Waste affecting the local residents life Noise affecting the people around Operations in the factory leading to the pollution of air and water in the local area Faulty or dangerous products breaking the law A childs toy causing harm to children Food causing health problems Many of the above problems may affect the image of a business. Customers may lose their confidence for the product. And sales may be seriously affected
Copyright 2002 by Harcourt, Inc. All rights reserved.

Production crises

Human resources crises

Environmental crises

Legal crises

Image crises

Strategy and Strategic Planning -Strategic Planning for Crisis


Table 5-4 Contingency plans for solving the crisis problems
Types of crises Possible contingency plans Set aside contingency funds for liquidity problems Sell some assets to raise funds Borrow bank loans or overdraft Obtain government assistance Let some of the work done by other machines Ask other producers to help produce Rearrange the time of production, such as overnight working Use flexible workforce or production methods planning effective consultation for strikes change reward systems to motivate people use flexible workforce communicate well with employees

Financial crises

Production crises

HR crises

Image crises

Act quickly when faced with the problem of image Withdraw the faulty products immediately Promote the fact that the problem has been found and will be solved soon. Spend some money for improving the damaged environment or compensating those who have suffered.
Copyright 2002 by Harcourt, Inc. All rights reserved.

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