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Strategic Planning for Managers

Strategic Planning for Managers . Contents. Five Tasks of Strategic Planning Factors Shaping the Choice of Strategy Three Tests of Best Strategy Analyzing Industry Environment and Crafting Competitive Strategy Strategy Implementation and Execution.

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Strategic Planning for Managers

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  1. Strategic Planning for Managers

  2. Contents • Five Tasks of Strategic Planning • Factors Shaping the Choice of Strategy • Three Tests of Best Strategy • Analyzing Industry Environment and Crafting Competitive Strategy • Strategy Implementation and Execution If you find this presentation useful, please consider telling others about our site (www.studyMarketing.org)

  3. Five Tasks of Strategic Planning

  4. Five Tasks of Strategic Planning Crafting a strategy to achieve the desired outcomes Forming a strategic vision Setting objectives Evaluating performance, monitoring new developments, and initiating corrective adjustments Implementing and executing the chosen strategy

  5. Forming a Strategic Vision • Very early in the strategy-making process, company managers need to pose a set of questions: • "What is our vision for the company — where should the company be headed, what should its future technology-product-customer focus be, what kind of enterprise do we want to become, what industry standing do we want to achieve in five years?" Forming a strategic vision

  6. Setting Objectives • The purpose of setting objectives is to convert managerial statements of strategic vision and business mission into specific performance targets — results and outcomes the organization wants to achieve. • Setting objectives and then measuring whether they are achieved or not help managers track an organization's progress. Setting objectives

  7. Strategic Objectives in Four Perspectives Enhance Long-term Shareholder Value Improve Cost Efficiency Increase Revenue Growth Financial Build High Performance Products Expand Market Share Enhance Brand Image Customer Achieve Operational Excellence Drive Demand through Customer Relation Management Implement Good Environmental Policy Manage Dramatic Growth through Innovation Internal Process Learning & Growth Develop Strategic Competencies Build Learning Culture Expand Capabilities with Technology

  8. Crafting Strategy • A company's strategy represents management's answers to such fundamental business questions as : • whether to concentrate on a single business or build a diversified group of businesses • whether to cater to a broad range of customers or focus on a particular market niche • whether to develop a wide or narrow product line • how to respond to changing buyer preferences • how big a geographic market to try to cover • how to react to newly emerging market and competitive conditions • how to grow the enterprise over the long term. Crafting a strategy to achieve the desired outcomes

  9. What Does a Company's Strategy Consist Of? • Company strategies concern how: • how to grow the business • how to satisfy customers • how to outcompete rivals • how to respond to changing market conditions • how to manage each functional piece of the business and develop needed organizational capabilities • how to achieve strategic and financial objectives Crafting a strategy to achieve the desired outcomes

  10. Strategy Implementation and Execution • Strategy implementation concerns the managerial exercise of putting a freshly chosen strategy into place • Strategy execution deals with the managerial exercise of supervising the ongoing pursuit of strategy, making it work, and showing measurable progress in achieving the targeted results. Implementing and executing the chosen strategy

  11. Strategy Evaluation and Monitoring • It is management's duty to stay on top of the company's situation, deciding whether things are going well internally, and monitoring outside developments closely. • Marginal performance or too little progress, as well as important new external circumstances, will require corrective actions and adjustments. Evaluating performance, monitoring new developments, and initiating corrective adjustments

  12. Strategy Hierarchy Corporate Strategy Business Strategies Strategy hierarchy for a diversified company Functional Strategies (R&D, Marketing, Manufacturing, HR, Finance, etc. Operating Strategies (regions, plants, departments within functional areas)

  13. Strategy Hierarchy Business Strategies Strategy hierarchy for a single-business company Functional Strategies (R&D, Marketing, Manufacturing, HR, Finance, etc. Operating Strategies (regions, plants, departments within functional areas)

  14. Strategy Hierarchy Corporate Strategic Vision Corporate Strategic Objectives Corporate Strategic Strategy Business-Level Strategic Vision Business-Level Strategic Objectives Business-Level Strategy Functional Areas Visions Functional Areas Objectives Functional Areas Strategies Operating Unit Visions Operating Unit Objectives Operating Unit Strategies

  15. Factors Shaping the Choice of Strategy

  16. Factors Shaping the Choice of Strategy External Factors Competitive conditions and industry attractiveness Company opportunity and threat Economic, societal, political, and government regulations The mix of considerations that determines a company’s strategic situation Personal ambitions and business philosophies of key executives Company strengths and weaknesses, competencies and capabilities Shared values and company culture Internal Factors

  17. Factors Shaping the Choice of Strategy • What an enterprise can and cannot do strategywise is always constrained by what is legal, by what complies with government policies and regulatory requirements, by what is considered ethical, and by what is in accord with societal expectations and the standards of good social and community citizenship. Economic, societal, political, and government regulations

  18. Factors Shaping the Choice of Strategy • An industry's competitive conditions and overall attractiveness are big strategy-determining factors. • A company's strategy has to be tailored to the nature and mix of competitive factors in play—price, product quality, performance features, service, war­ranties, and so on. Competitive conditions and industry attractiveness

  19. Factors Shaping the Choice of Strategy • A company's strategy needs to be deliberately aimed at capturing its best growth opportunities, especially the ones that hold the most promise for building sustainable competitive advantage and enhancing profitability. • Strategy should also provide a defense against external threats to the company's well-being and fu­ture performance. Company opportunity and threat

  20. Factors Shaping the Choice of Strategy • One of the most pivotal strategy-shaping internal considerations is whether a company has or can acquire the resources, competencies, and capabilities needed to execute a strategy proficiently. • The best path to competitive advantage is found where a firm has competitively valuable resources and competencies, where rivals can't develop comparable capabilities except at high cost or over an extended period of time. Company strengths and weaknesses, competencies and capabilities

  21. Factors Shaping the Choice of Strategy • Managers do not dispassionately assess what strategic course to steer. • Their choices are typically influenced by their own vision of how to compete and how to position the enterprise and by what image and standing they want the company to have. Personal ambitions and business philosophies of key executives

  22. Factors Shaping the Choice of Strategy • An organization's policies, practices, traditions, philosophical beliefs, and ways of doing things combine to create a distinctive culture. • The stronger a company's culture, the more that culture is likely to shape the company's strategic actions, sometimes even dominating the choice of strategic moves. Shared values and company culture

  23. Strategic Analysis and Strategic Choices Analyzing strategically about industry and competitive conditions What strategic options does the company realistically have? What is the best strategy? Analyzing strategically about a company’s own situation

  24. Strategic Analysis and Strategic Choices • The Key Questions • What are the industry’s dominant economic features? • What is causing the industry’s competitive structure and business environment to change? • Which companies are in the strongest/weakest positions? • What strategic moves are rivals likely to make next? • What are the key factors for competitive success? • Is the industry attractive and what are the prospects for above-average profitability? Analyzing strategically about industry and competitive conditions

  25. Strategic Analysis and Strategic Choices • The Key Questions • How well is the company’s present strategy working? • What are the company’s strengths, weaknesses, opportunities, and threats? • Are the company’s prices and costs competitive? • How strong is the company’s competitive position? • What strategic issues does the company face? Analyzing strategically about a company’s own situation

  26. Three Tests of Best Strategy The Goodness of Fit Test The Competitive Advantage Test The Best Strategy The Performance Test

  27. Three Tests of Best Strategy The Goodness of Fit Test • A good strategy has to be well matched to industry and competitive conditions, market opportunities and threats, and other aspects of the enterprise's external environment. • At the same time, it has to be tailored to the company's resource strengths and weaknesses, competencies, and competitive capabilities.

  28. Three Tests of Best Strategy The Competitive Advantage Test • A good strategy leads to sustainable competi­tive advantage. • The bigger the competitive edge that a strategy helps build, the more powerful and effective it is.

  29. Three Tests of Best Strategy The Performance Test • A good strategy boosts company performance. • Two kinds of performance improvements are the most telling of a strategy's caliber: gains in profitability and gains in the company's competitive strength and long-term mar­ket position.

  30. Analyzing Industry Environment and Designing Competitive Strategy

  31. Porter’s Five Forces Buyer Power Barriers to Entry Rivalry Threats of Substitutes Supplier Power

  32. The Intensity of Rivalry • A larger number of firms • Slow market growth • High fixed cost • High storages costs or highly perishable products • Low switching cost • Low level of product differentiation • Strategic stakes are high • High exit barriers • A diversity of rivals • Industry shakeout The intensity of rivalry is influenced by the following industry characteristics:

  33. Barriers to Entry • Absolute cost advantages • Proprietary learning curve • Access to inputs • Government policy • Economies of scale • Capital requirements • Brand identity • Switching costs • Access to distribution • Expected retaliation • Proprietary products Entry barriers are influenced by the following factors :

  34. Threats of Substitutes • Switching costs • Buyer inclination to substitute • Price-performance trade-off of substitutes Threats of substitutes are influenced by the following factors :

  35. Buyer Power • Bargaining leverage • Buyer volume • Buyer information • Brand identity • Price sensitivity • Threat of backward integration • Product differentiation • Buyer concentration vs. industry • Substitutes available • Buyers' incentives Buyer power is influenced by the following factors :

  36. Supplier Power • Supplier concentration • Importance of volume to supplier • Differentiation of inputs • Impact of inputs on cost or differentiation • Switching costs of firms in the industry • Presence of substitute inputs • Threat of forward integration • Cost relative to total purchases in industry Supplier power is influenced by the following factors :

  37. Sample Form for an Industry and Competitive Analysis Summary

  38. Five Generic Competitive Strategies Low Cost Differentiation Overall Low Cost Leadership Strategy Differentiation Strategy Broad Market Segment Best Cost Strategy Focused Low Cost Strategy Focused Differentiation Strategy Narrow Market Segment

  39. Five Generic Competitive Strategies Overall Low Cost Leadership Strategy Appealing to a broad spectrum of customers based on being the overall low-cost provider of product and service Broad Differentiation Strategy A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition

  40. Five Generic Competitive Strategies Overall Low Cost Leadership Strategy Appealing to a broad spectrum of customers based on being the overall low-cost provider of product and service Broad Differentiation Strategy A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition

  41. Five Generic Competitive Strategies Best Cost Strategy • Giving customers more value for the money by incorporating good-to-excellent product attributes at a lower cost than rivals • The target is to have the lowest (best) costs and prices compared to rivals offering products with comparable upscale attributes

  42. Generic Strategies and Industry Forces

  43. Strategy Implementation and Execution

  44. Strategy Implementation Building a capable organization Linking budget to strategy Designing strategy-supportive reward system Establishing strategy-supportive policies and procedures Effective Strategy Execution Instituting best practices and commitment to continuous improvement Creating a strategy-supportive corporate culture Installing information system to support strategy execution Exerting strategic leadership HR & Organization Development Factor System Factor

  45. Building a Capable Organization • Staffing the organization • Putting together a strong management team • Recruiting and retaining talented employees Building a capable organization • Building Core Competencies and Capabilities • Developing competence/capability portfolio suited to current strategy • Updating and reshaping the portfolio as external conditions and strategy change • Structuring the Organization and Work Effort • Organizing business function and processes, value chain activities, and decision making

  46. Strategy-supportive Reward System • Strategy-supportive motivational practices and reward systems are powerful management tools for gaining employee buy-in and commitment. • The key to creating a reward system that promotes good strategy execution is to make strategically relevant measures of performance the dominating basis for designing incentives, evaluating individual and group efforts, and handing out rewards. Designing strategy-supportive reward system

  47. Strategy-supportive Corporate Culture • Building a strategy-supportive culture is important to successful strategy execution because it produces a work climate and organizational esprit de corps that thrive on meeting performance targets and being part of a winning effort. Creating a strategy-supportive corporate culture

  48. Strategic Leadership • Strategic leaders encourage people to be innovative in order to keep the organization responsive to changing conditions, alert to new opportunities, and anxious to pursue fresh initiatives. • Strategic leaders also actively push corrective actions to improve strategy execution and overall strategic performance. Exerting strategic leadership

  49. Linking Budget to Strategy • Reworking the budget to make it more strategy-supportive is a crucial part of the implementation process because every organization unit needs to have the people, equipment, facilities, and other resources to carry out its part of the strategic plan. Linking budget to strategy

  50. Strategy-supportive Policy • Prescribing new or freshly revised policies and operating procedures aids the task of implementation (1) by promoting consistency in how particular strategy-critical activities are performed in geographically scattered operating units and (2) by helping to create a strategy-supportive work climate and corporate culture. Establishing strategy-supportive policies and procedures

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