OVERVIEW

OF
STRATEGIC PLANNING
CONCEPTS

VISION
STATEMENT ABOUT A COMPANYS
LONG-TERM DIRECTION

Why is a Strategic Vision

Important?
A managerial imperative exists to look beyond
today and think strategically about
Impact of new technologies
How customer needs and expectations are changing
What it will take to outrun competitors
Which promising market opportunities ought to be

aggressively pursued

External and internal factors driving what a company

needs to do to prepare for the future

MISSION
DEFINES COMPANYS BUSINESS
1. PRODUCT / MARKET
2. TERRITORY / GEOGRAPHY

VISION vs. MISSION

A strategic vision
concerns a firms future
business path -- where
we are going
Markets

to be pursued

Future

technologyproduct-customer focus
Kind

of company that
management is
trying to create

A mission statement
focuses on current
business activities -- who
we are and what we do
Current

product and
service offerings
Customer

served

needs being

Technological

capabilities

and business

MICROSOFTS
VISION/MISSION
"To enable people
and businesses
throughout the
world to realize
their full potential"

GES
VISION/MISSION
GE is committed to achieving
worldwide leadership in each of its
businesses. To achieve that
leadership, GE's ongoing business
strategy centers on four key growth
initiatives:
-

Technology
Services
Customer Centricity
Globalization

Example of Vision & Mission

Intel
Our vision: Getting to a billion connected computers
worldwide, millions of servers, and trillions of dollars
of e-commerce. Intels core mission is being the
building block supplier to the Internet economy and
spurring efforts to make the Internet more useful.
Being connected is now at the center of peoples
computing experience. We are helping to expand the
capabilities of the PC platform and the Internet.

Simple Mission Statements

Eastman Kodak
We are in the picture business.

Wit Capital

(an Internet startup company)

Our mission is to be the premier Internet
investment banking firm focused on the offering
and selling of securities to a community of online
individual investors.

More Mission Statements

Otis Elevator
Our mission is to provide any customer a means
of moving people and things up, down, and
sideways over short distances with higher
reliability than any similar enterprise in the world.

Avis Rent-a-Car
Our business is renting cars. Our mission is total
customer satisfaction.

Setting Goals & Objectives

Second Task of Strategic Management
Converts strategic vision and
mission into specific
performance targets
Creates yardsticks to track
performance
Pushes firm to be inventive and
focused on results
Helps prevent complacency and
coasting

GOALS
BROAD TARGETS

OBJECTIVES
QUANTIFIED & TIME-BASED

Financial Goals

Strive for stock price appreciation

equal to or above the S&P 500 average

Maintain a positive cash flow every year

Achieve and maintain a AA bond rating

Financial Objectives
Grow

earnings per share 15% annually

Boost

annual return on investment (or

EVA) from 15% to 20% within three years
Increase

annual dividends per share

to stockholders by 5% each year

Strategic Goals
Increase firms market share
Overtake key rivals on quality or
customer
service or product performance
Attain lower overall costs than rivals
Boost firms reputation with customers
Attain stronger foothold in international markets
Achieve technological superiority
Become leader in new product introductions
Capture attractive growth opportunities

What is Strategy?
A companys strategy consists of the set of
competitive moves and business approaches that
management is employing to run the company
Strategy is managements game plan to
Attract and please customers
Stake out a market position
Conduct operations
Compete successfully
Achieve organizational objectives

Relationship Between Strategy

and Business Model
Strategy - Deals with a
companys competitive
initiatives and business
approaches

y
eg
t
tra

s
es
n
si el
Bu od
M

Business Model
-Concerns whether
revenues and costs
flowing from the
strategy demonstrate
the business can be
amply profitable and
viable

Levels of Strategy-Making in
a Diversified Company
Corporate-Level Managers

Corporate
Strategy
Two-Way Influence

Division Managers

Business Strategies
Two-Way Influence

Functional Mgrs

Functional Strategies
Two-Way Influence

Operating
Mgrs

Operating Strategies

Levels of Strategy-Making in
a Single-Business Company
Executive-Level Managers

Business
Strategy
Two-Way Influence

Functional Managers

Functional Strategies

Two-Way Influence

Operating
Managers

Operating Strategies

Networking of Missions,
Goals/Objectives, and Strategies
Level 1
CorporateLevel
Managers

Level 2
Business-Level
Managers

Level 3
Functional
Managers

Level 4
Plant Managers,
Lower-Level
Supervisors

Corporate-wide
Strategic
Vision

Corporate
Level
Goals/Objs

Corporate
Level
Strategy

Two-Way Influence

Two-Way Influence

Two-Way Influence

Business
Level
Mission

Business
Level
Goals/Objs

Business
Level
Strategies

Two-Way Influence

Two-Way Influence

Two-Way Influence

Functional
Missions

Functional
Goals/Objs

Functional
Strategies

Two-Way Influence

Two-Way Influence

Two-Way Influence

Operating
Missions

Operating
Goals/Objs

Operating
Strategies

SWOT Analysis What to Look For

Potential Resource
Strengths

Potential Resource
Weaknesses

Potential Company
Opportunities

Potential External
Threats

Powerful strategy
Strong financial
condition
Strong brand name
image/reputation
Widely recognized
market leader
Proprietary
technology
Cost advantages
Strong advertising
Product innovation
skills
Good customer
service
Better product
quality
Alliances or JVs

No clear strategic
direction
Obsolete facilities
Weak balance
sheet; excess debt
Higher overall
costs than rivals
Missing some key
skills/competencies
Subpar profits
Internal operating
problems . . .
Falling behind in
R&D
Too narrow
product line
Weak marketing
skills

Serving additional
customer groups
Expanding to new
geographic areas
Expanding product
line
Transferring skills
to new products
Vertical integration
Take market share
from rivals
Acquisition of
rivals
Alliances or JVs to
expand coverage
Openings to exploit
new technologies
Openings to extend
brand name/image

Entry of potent new

competitors
Loss of sales to
substitutes
Slowing market
growth
Adverse shifts in
exchange rates &
trade policies
Costly new
regulations
Vulnerability to
business cycle
Growing leverage
of customers or
suppliers
Reduced buyer
needs for product
Demographic
changes

The Three Steps

of SWOT Analysis

Core Competencies -- A
Valuable Company Resource
A competence becomes a core competence when
the well-performed activity is central to a
companys competitiveness and profitability
Often, a core competence results from
collaboration among different parts of a company
Typically, core competencies reside in a companys
people, not in assets on the balance sheet
A core competence gives a company a
potentially valuable competitive capability
and represents a definite competitive asset

Examples: Core Competencies

Expertise in integrating multiple technologies to
create families of new products
Know-how in creating operating systems for cost
efficient supply chain management
Speeding new/next-generation products to market
Better after-sale service capability
Skills in manufacturing a high quality product
System to fill customer orders accurately and swiftly

Distinctive Competence -- A
Competitively Superior Resource
A distinctive competence is a competitively significant activity
that a company performs better than its competitors

A distinctive competence
Represents a competitively
valuable capability rivals do not have

#1

Presents attractive potential for

being a cornerstone of strategy
Can provide a competitive edge in the
marketplacebecause it represents a
competitively superior resource strength

Examples: Distinctive Competencies

Sharp Corporation
Expertise in flat-panel display technology

Toyota, Honda, Nissan

Low-cost, high-quality manufacturing

capability and short design-to-market cycles

Intel
Ability to design and manufacture

ever more powerful microprocessors for PCs

Starbucks
Store ambience and innovative coffee

drinks

Determining the Competitive

Value of a Company Resource
To qualify as the basis for sustainable competitive
advantage, a resource is measured by 4 tests
1. Is the resource hard to copy ?
2. Does the resource have staying power -- is it
durable ?
3. Is the resource really competitively superior ?
4. Can the resource be trumped by the different
capabilities of rivals ?

Are the Companys

Prices and Costs Competitive?
Assessing whether a firms costs are
competitive with those of rivals is a crucial part
of company analysis
Key analytical tools
Value chain analysis
Benchmarking

The Concept of a
Company Value Chain
A companys business consists of all activities
undertaken in designing, producing, marketing,
delivering, and supporting its product or service
A companys value chain consists of a linked set of
value-creating activities performed internally
The value chain contains two types of activities
Primary activities -- where most of the value

for customers is created

Support activities -- facilitate performance of the
primary activities

Characteristics of
Value Chain Analysis
Combined costs of all activities in a companys
value chain define the companys internal cost
structure
Compares a firms costs activity
by activity against costs of key rivals
From raw materials purchase to
Price paid by ultimate customer

Pinpoints which internal activities are a source of

cost advantage or disadvantage

Representative
Company Value Chain

Representative Value Chain for an

Entire Industry

The Value Chain System

for an Entire Industry
Assessing a companys cost competitiveness involves
comparing costs all along the industrys value chain
Suppliers value chains are relevant because
Costs, quality, and performance of inputs provided by

suppliers influence a firms own costs and product

performance

Forward channel allies value chains are relevant

because
Forward channel allies costs and margins are part of

price paid by ultimate end-user

Activities performed affect end-user satisfaction

Example: Key Value Chain Activities

Pulp & Paper Industry

Timber farming
Logging
Pulp mills
Papermaking

Example: Key Value Chain Activities

Home Appliance Industry

Parts and components manufacture

Assembly
Wholesale distribution
Retail sales

Example: Key Value Chain Activities

Soft-Drink Industry
Processing of basic ingredients
Syrup manufacture
Bottling and can filling
Wholesale distribution
Advertising
Retailing

Albertsons

Example: Key Value Chain Activities

Computer Software Industry
Programming
Disk loading
Marketing
Distribution

Activity-Based Costing: A Key

Tool in Analyzing Costs
Determining whether a companys costs are in
line with those of rivals requires
Measuring how a companys costs compare with those

of rivals activity-by-activity

Requires having accounting data that measures

the cost of each value chain activity
Activity-based accounting systems
provide data for determining costs
for each relevant value chain activity

Benchmarking Costs of
Key Value Chain Activities
Focuses on cross-company comparisons of how
certain activities are performed and the costs
associated with these activities

Purchase of materials
Payment of suppliers
Management of inventories
Getting new products to market
Performance of quality control
Filling and shipping of customer orders
Training of employees
Processing of payrolls

Objectives of Benchmarking
Determine whether a company is performing particular
value chain activities efficiently by studying practices and
procedures used by other companies
Understand the best practices in performing
an activity -- learn what is the best way
to do a particular activity from those
demonstrating they are best-in-world
Assess if companys costs in performing particular value
chain activities are in line with competitors
Learn how other firms achieve lower costs
Take action to improve companys cost competitiveness

INDUSTRY
ANALYSIS

Environmental Components

Industrys Dominant Economic Traits

Market size and growth
rate
Position in life cycle
Number of rivals
Buyer needs and
requirements
Production capacity
Pace of technological
change
Prevalence of vertical
integration

Product innovation
Degree of product
differentiation
Scope of competitive
rivalry
Economies of scale
Experience and learningcurve effects
Industry profitability

5 Forces Model of Competition

Industry Driving Forces

Internet and e-commerce opportunities
Increasing globalization of industry
Changes in long-term industry growth rate
Changes in who buys the product and how
they use it
Product innovation
Technological change/process innovation
Marketing innovation

Industry Driving Forces

Entry or exit of major firms
Diffusion of technical knowledge
Changes in cost and efficiency
Market shift from standardized to differentiated
products (or vice versa)
Changes in degree of uncertainty and risk
Regulatory policies / government legislation
Changing societal concerns, attitudes, and
lifestyles

What Are the Key Factors for

Competitive Success?
Competitive factors most affecting every
industry members ability to prosper

Specific strategy elements

Product attributes
Resources
Competencies
Competitive capabilities

KSFs spell the difference between

Profit and loss
Competitive success or failure

Example: KSFs for Beer Industry

Full utilization of brewing capacity -- to
keep manufacturing costs low
Strong network of wholesale distributors -to gain access to retail outlets
Clever advertising -- to induce beer
drinkers to buy a particular brand

Example: KSFs for Apparel

Manufacturing Industry
Appealing designs and
color combinations -- to
create buyer appeal
Low-cost manufacturing
efficiency -- to keep
selling prices
competitive

COMPETITOR
ANALYSIS

What Are the Market Positions of

Industry Rivals?
One technique for revealing the different
competitive positions of industry rivals is
strategic group mapping
A strategic group
consists of those
rivals with similar
competitive approaches
in an industry

Strategic Group Mapping

Firms in same strategic group have two or more
competitive characteristics in common

Have comparable product line breadth

Sell in same price/quality range
Emphasize same distribution channels
Use same product attributes to appeal to similar types
of buyers
Use identical technological approaches
Offer buyers similar services
Cover same geographic areas

Example: Strategic Group Map

of Selected Retail Chains

Assessing a Companys Competitive

Strength vs. Key Rivals
1. List industry key success factors and other relevant
measures of competitive strength
2. Rate firm and key rivals on each factor using rating scale
of 1 to 10 (1 = very weak; 5 = average; 10 = very strong)
3. Decide whether to use a weighted or unweighted rating
system (a weighted system is usually superior because the
chosen strength measures are unlikely to be equally
important)
4. Sum individual ratings to get an overall measure of
competitive strength for each rival
5. Based on the overall strength ratings, determine overall
competitive position of firm

Strategy and Competitive Advantage

Competitive advantage exists when a firms
strategy gives it an edge in
Attracting customers and
Defending against competitive forces
Key to Gaining a Competitive Advantage

Convince customers firms product / service

offers superior value
A good product at a low price
A superior product worth paying more for
A best-value product

5 Generic Competitive Strategies

Menu of Strategy Options

for Winning in the Marketplace