BA686-Week #2: Strategic Planning

1. BA686-Week #2:Strategic Planning

2. Situation/SWOT Analysis Strategic Planning Functional Integration Performance Assessment • Company • Consumers • Competitors • Conditions • PEST Functional Integration • Profits • Mrkt Share • ROA • ROS • ROE • Asset T/O • Stock • Mrkt Cap Marketing Growth &Competitive Strategies R&D Production HR Finance The Big Picture

3. Consumer Conditions Company Competitors Begun-Step # 1 Situation & SWOT Analysis Initial Situation

4. Consumers Competitors Conditions You are finding answers re: • How the market is segmented & the relevant criteria that consumers use in their purchasing decisions • The nature & magnitude of the competition • Existing & emerging Economic & Technological trends that will impact demand, pricing, product design & positioning

5. Your Company’s: • Financial Situation • Margins • Working Capital • Financial Structure • Wealth Creation • Productivity • Marketing Mix

6. Situation &Swot Analysis answers 1st of the big 3 Questions: Where are we now?

7. Strategic Thinking necessary to answer next 2 Big Questions: 1.Where are we now? 2.Where do we want to go? • What business(es) should be in • Market positions to stake out? • Consumer needs & segments serve? • Outcomes to achieve? 3.How do we get there?

8. “If you don’t know where you are going any route will get you there.”Chris Bartlett,Harvard Business School

10. What is Strategy? • A process • A plan • A Set of Goals & Objectives • A Vision • A Coordinating effort • A Management tool • A Set of relationships • A Lecture in BA686

11. One definition of Strategy: Management’s “game plan”- to • Stake out a market position • Conduct operations • Attract & satisfy customers • Achieve organizational objectives

12. Strategic Fit Objectives Resources Another Definition… Strategy isthe managerial process of: developing & maintaining a strategic fit between the organization's objectives & resources… …..and its changing market opportunities

13. Even if know what strategy is-- • Only5%of workforce gets the strategy • Only25%of managers have incentives linked to strategy • 60%of organizations don't link budgets to strategy • 85%of executive teams spend less than 1hour/ month discussing strategy • 90% fail to execute strategy successfully Robert S. Kaplan and David P. Norton The Strategy-Focused Organization, 2000

14. Corporation Sensors Unit Nano-Tech Unit Cons.Elec. Unit Finance Production Marketing HR / R&D 3 Levels of Strategy Corporate-Level :In what business do we compete? Business-Level: How do we compete? Functional-Level : How do we coordinate?

15. Corporate Growth Strategy Business Unit Competitive Strategy Functional Strategies R&D Marketing Production Finance Human Resources

16. Corporation Level 1-Corporate Strategy In which businesses do we compete? Corporation ?

17. Growth Strategy Deciding on what Products & Markets to compete with & in…

18. Growth Strategies P R O D U C T Present New Market Penetration ProductDevelopment Present M A R K E T Diversification Market Development New

19. MarketPenetration Increase market share among existing customers. MarketDevelopment Attract new customers to existing products Product Development Create new products for present markets Concentrate on your primary line of business & look for ways to meet growth objectives thru increasing your level of operation in your primary business

20. STRATEGIC BUSINESS UNIT MARKET COMPETITOR COMPETITOR COMPETITOR A B C Level 2: Business Unit Strategy: How do we Compete? Focus? Price? Quality?

21. w/ what Competitive Advantage • ThruCost Advantage- • Offer comparable benefit as competitor but produced at lower cost • ThruDifferentialAdvantage- • Offer superior benefits to competitor- • w/in which Market Segments • All market segments • Niche segments • Evolving segments

22. Competitive Strategy is the creation of a unique & valuable position- The position is based on- • Performing the same activities as competitors, but differently --or performing a different set of activities • Porters Generic Strategies • Strategies & Mission Statements

23. Cost: Design, produce, market more efficiently than competitors You can also Formulate Strategy by what dimension you compete on: Differentiation: Deliver unique & superior value in terms of product quality, features, service

24. You can Formulate Strategy by the- Number & nature of segmentscompete w/in- • Undifferentiated • Differentiated • Niche Strategy

25. & You can Formulate Strategy by-Riding A Products Life Cycle • Adjust Marketing Mix according to natural Drift of products w/in segments-

26. Put them all together &… • Cost/Quality Differentiation • Number & nature of segments compete w/in • Riding the Product Life Cycle

27. Competitive Strategy Matrix Number & nature of segments compete w/in Ride Product LifeCycle #2 #3 Compete on: Broad Market Niche Mrkt Evolving Mrkt Cost #1 Product Quality

28. Competitive Strategy Matrix Broad Mrkt Niche Mrkt Evolving Mrkt Compete on: Cost Product Quality

29. Cost LeadershipStrategic Choices • A cost leader does not try to be industry innovator • The overriding goal is- increased efficiency & lower costs relative to rivals • Will seek to minimize costs in marketing, R&D & production

30. Business-Level Strategy:Cost Leadership • Advantages • A cost leader is able to charge lower prices • Even at same price more efficient cost leader generates greater profitability

31. An overall cost leader will attempt to be low-cost producer in every segment of the market.

32. -- seeks to dominate the price sensitive market segments. • --sets prices below all competitors — and still be profitable

33. Products will be allowed to age & change in appeal from High End, to Traditional, and eventually Low End buyers.

34. Competitive Strategy Matrix Broad Mrkt Niche Mrkt Evolving Mrkt Compete on: Cost Product Quality

35. Generic Business-Level Strategy: Differentiation Create a product that customers perceive as distinct/unique & offer superior quality/service Advantage Customers expect & willing to pay premium prices

36. Differentiator • Will have significant expenditures in R&D & production….Because you want/need to make high quality/highly desirable product • Will have significant expenditures in marketing… Because you need to create maximum awareness & brand equity.

37. Differentiation Advantage … as you develop greater brand equity —thru increased product quality & awareness …. You develop greater brand loyalty…. The greater the loyalty.. the less the price sensitivity

38. Differentiation: Disadvantages • Difficulty in maintaining long-term distinction in customers’ eyes • Agile competitors can quickly imitate • Difficulty/expense of maintaining premium pricing– requires greater marketing costs

39. match their ideal criteria for positioning, age, and reliability.

40. Level 3- Functional Strategy How do we coordinate?

41. What makes a decision strategic? • Multi-functional in scope & consequences • Requires choice & trade-offs, integration & alignment

42. In order to execute & achieve selected growth & competitive strategies--Need to coordinate decisions across all Functional domains Production R&D Marketing HR Finance

43. Functional Integration & Strategic Alignment

44. Getting In-Sync w/ Functional Planning The goal of functional planning is to achieve a state of Internal Strategic Alignment FINANCE PRODUCTION MARKETING

45. INTERNAL STRATEGIC ALIGNMENT FINANCE Achieved when : All Decisions made by & within all functional areas are in sync w/ one another, As well as with the overall strategic direction of the firm PRODUCTION MARKETING

46. Functional Planning Matrices Examples of: internal strategic alignment

47. Functional Alignment: In Achieving Cost Efficiency

48. Functional Alignment: Implementing Differentiation Strategy

49. Functional Alignment: In Achieving Superior Innovation

50. Functional Alignment: Superior Customer Rlshps