Strategic Planning and Strategic Management

1. MANAGEMENT Meeting and Exceeding Customer Expectations EIGHTH EDITION Strategic PlanningandStrategic Management Prepared by Deborah Baker Texas Christian University

2. learning objectives • Describe the nature of strategic planning and strategic management • Distinguish between strategy formulation and strategy implementation • Explain the steps involved in the strategic planning process • Explain the importance of assessing the internal and external environments as a basis for strategic planning

3. learning objectives (continued) • Identify the sources and kinds of information required in the strategic planning process • Describe the factors involved in strategy implementation • Explain the formulation of corporate-level strategy, business-level strategy, and functional-level strategy

4. Strategic Planning Organization’sMission Resources Long-Term Goals and Strategies

5. Strategic Management 1 • Top management’s responsibility • Defines the firm’s position • Formulates strategies • Guides the execution of long-term organizational functions • Helps position the organization to achieve a superior competitive fit

6. Strategic Planning Questions 1 • What is the organization’s position in the marketplace? • What does the organization want its position to be? • What trends and changes are occurring in the marketplace? • What are the best alternatives to help the organization achieve its goals?

7. Four Elements of Strategy Scope ResourceDeployment Competitive Advantage Synergy 1

8. Scope Position or size Geographic markets Products and services 1

9. Resource Deployment 1 Allocation of Resources • Material • Financial • Human

10. Distinctive Competitive Advantage 1 DistinctiveCompetitive Advantage A unique position in relationship to competition Core Competencies • what a company knows • what it does best

11. Synergy 1 Synergy occurs when the parts of a single organization or two organizations… • interact • draw on each other’s strengths • produce a joint effort greater than the sum of the parts acting alone • achieve a special advantage 2+2=5

12. Characteristics of Strategic Managers 1. Well informed 2. Skill at focusing their time and energy 3. Good at building consensus 4. Good at creating contingency plans 5. Accomplished at simplifying the process 1

13. Strategy Formulation vs. Strategy Implementation Strategy Formulation • assessing environments • analyzing core competencies • creating goals and plans 2

14. Strategy Formulation vs. Strategy Implementation Strategy Implementation • creating teams • adapting new technologies • focusing on processes • facilitating communications • offering incentives • making structural changes 2

15. Levels of Strategy What business are we in? What business should we be in? Corporate-Level Strategy How do we compete? Business-Level Strategy How do we support business-level strategy? Functional-Level Strategy Human Resources R&D Finance Marketing Production 2

16. Corporate Strategy What business are we in? Questions What business should we be in? 2

17. Business-Level Strategy How do we compete? • How much will be spent on such activities as advertising and R & D? • What equipment and facilities will be needed? • Should existing product lines be expanded or contracted? 2

18. Functional-Level Strategy Human ResourceManagement R & D Marketing Finance Production 2

19. Strategic Planning Process 3

20. Strategic Planning Process Create mission statement and goals Step 1 Analyze SWOT of internal and external environments Step 2 Reassess the organization’s mission statement, goals, and strategies Step 3 Formulate a strategic plan containing goals, strategies, and resources Step 4 Implement the strategies Step 5 Monitor and evaluate the results Step 6 3

21. SWOT Analysis Strengths Weaknesses Opportunities Threats 4 Internal External

22. External Sources of Information Customers Suppliers Partners GovernmentReports Consultants Trade Journals IndustryAssociations 5

23. Internal Sources of Information Financial Statements and Analyses Employee Surveys Progress Reports on Operations Statistical Analyses of Data Observation Outside Consultants 5

24. Internal Strengths and Weaknesses ManagementFactors MarketingFactors ProductionFactors Research Factors Human Resource Factors FinancialFactors 5

25. External Strengths and Weaknesses NewCompetitors SubstituteProducts NewMarketplaces CompetitorStrategy Changes Customer Profitability Actions ofSuppliers GovernmentRegulations New Technology State of theEconomy 5

26. Example of a SWOT Analysis 5

27. Outcomes of a SWOT Analysis 5 Reaffirm the current mission statement, goals, and strategies Formulate a new mission statement, goals, and strategies

28. Leadership Criteria IdeaLeadership CapabilityLeadership PeopleLeadership 6 From Craig WeatherupFormer CEO Pepsi Bottling Group

29. Principles to Follow WhenImplementing Strategy • Build a fluid, dynamic organization • Create mechanisms to respond to revolutionary change • Keep specialization to a minimum • Draft the best player • Develop from within; stimulate from without • Encourage everyone to take full responsibility 6

30. Grand Strategies Growth Diversification Integration Stability Retrenchment 7

31. Grand Strategies Growth Achieved internally by investingor externally by acquisition Integration Adopted to stabilize its supply line or reduce costs, or to consolidate competition Diversification Adopted if the company wants to moveinto new products or markets Retrenchment Used to reduce the size or scope of a firm’s activities Stability Adopted when the organization wants toremain the same 7

32. Integration Strategies 7 • Vertical Integration • Gaining ownership of resources, suppliers, or distribution systems that relate to a company’s business • Horizontal Integration • A strategy to consolidate competition by acquiring similar products or services

33. Portfolio Strategy PortfolioStrategy Determines the mix of business units and product lines that will provide a maximum competitive advantage Autonomous businesses with their own identities but operating within the framework of the organization StrategicBusiness Units 7

34. BCG Growth-Share Matrix 7

35. Formulating Business-Level Strategy AdaptiveStrategies CompetitiveStrategies 7

36. Adaptive Strategies Prospector Based on innovation, taking risks, seeing out opportunities, and expansion Defender Based on holding current market share or retrenching Analyzer Attempt to maintain current market share while innovating in some markets Reactor No strategy--responds to environmental threats as they occur and has no clear sense of direction 7

37. Adaptive Strategies 7

38. Competitive Strategies Differentiation Set products or services apart from those of other companies Cost-Leadership Keep costs as low as possible through efficient operations and light controls Focus Target a specific market—a particular region or group of potential customers 7

39. Porter’s Generic Strategies Competitive Advantage Competitive Scope Low Cost Higher Cost Broad Overall Cost Leadership Differentiation Narrow Cost Focus DifferentiationFocus 7 Source: Adapted from Michael E. Porter, The Competitive Advantage of Nations (New York: The Free Press, 1980), p. 39.

40. Marketing Strategy Pricing Distribution Promotion Products 7

41. Production Strategy 7 • Plant location • Inventory control methods • Manufacturing techniques • Quality and productivity improvement • Outside suppliers

42. Human Resources Strategy 7 • Recruiting • Training • Developing

43. Financial Strategy 7 • Distribution or retention of profits • Spending and investing funds • Raising additional funds

44. R & D Strategy 7 • Invention and development of new technologies • New applications for existing technologies