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DEVELOPING STRATEGY: LONG-TERM BUSINESS PLANNING

DEVELOPING STRATEGY: LONG-TERM BUSINESS PLANNING. JEAN CLARKE LEEDS UNIVERSITY BUSINESS SCHOOL. AIMS OF THE LECTURE. To understand the meaning and importance of strategic management To understand what a company’s mission and objectives should contain To be able to conduct a PESTLE analysis

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DEVELOPING STRATEGY: LONG-TERM BUSINESS PLANNING

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  1. DEVELOPING STRATEGY: LONG-TERM BUSINESS PLANNING JEAN CLARKE LEEDS UNIVERSITY BUSINESS SCHOOL

  2. AIMS OF THE LECTURE • To understand the meaning and importance of strategic management • To understand what a company’s mission and objectives should contain • To be able to conduct a PESTLE analysis • To understand the various levels of planning • To complete a group task through drawing on the case study of Dyson

  3. MANAGING STRATEGY • Pearce and Robinson (1991) define strategic management as “the set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company’s objectives”. • It is an ongoing iterative process • Wider than initial business planning – sets long-term objectives and sets the business on a particular path • In today’s uncertain environment must be open to revision and change…

  4. MANAGEMENT AND CHANGE (Johnson, 1987) • Strategic Management: • Process by which organisations determine their purpose • Objectives and desired levels of attainment • Decide on actions for achieving these objectives in an appropriate time-scale, and frequently in a changing environment • Implement the actions and assess progress and results. • Actions may be changed or modified whenever and wherever necessary • Strategic change: • Changes which take place over time to the strategies and objectives of the organisation. • Change can be gradual or evolutionary, dramatic or even revolutionary

  5. IMPORTANCE OF STRATEGIC MANAGEMENT • The flame of competition has changed from smoky yellow to intense white heat. For companies to survive and prosper they will have to have a vision, a mission and a strategy. They will pursue the action arising from that strategy with entrepreneurial skill and total dedication and commitment to win. • Peter B. Ellwood, Chief Executive, Lloyds TSB Group

  6. GROUP TASK • Individuals should divide into groups of five • Discuss the statement above • Why do you think competition has increased? • Why is it more than important than ever to attend to strategic management? • What are the potential problems if firms do not consider strategic management?

  7. MISSION AND OBJECTIVES • Therefore an essential element is setting company’s mission and objectives • Mission: • Essential purpose of the organisation • Why it’s in existence • Nature of the business(es) it is in • Customers it seeks to serve and satisfy • Objectives/goals: • Desired results linked to particular time-scales • Size or type of organisation • Nature and variety of the areas of interest • Levels of success

  8. THE STRATEGIC PLANNING APPROACH (Ansoff, 1987) • Strategic analysis • Appraisal of the current situation & current strategies – SWOT • Determination of desirable changes to objectives & strategies • Strategic creation and choice • Search for & choose suitable courses of action • Strategy implementation • Implementation of changes • Monitoring progress, ongoing appraisal

  9. THE BUSINES ENVIRONMENT

  10. PESTEL – A FRAMEWORK FOR ANALYSING THE ENVIRONMENT • Political/legal • Economic • Socio-cultural • Technological • Environmental • Legal • Used to look at the future impact of environmental factors • Identify opportunities and threats

  11. PESTEL (Johnson and Scholes, 2003) • Political/legal • Monopolies legislation • Taxation policy • Foreign trade regulations • Employment law • Government - organisation relationship • Socio-cultural factors • Population demographics • Income distribution • Social mobility • Lifestyle changes • Attitudes to work & leisure • Environmental • Environmental protection laws • Energy consumption • Economic factors • GNP trends • Interest rates • Currency fluctuations & exchange rates • Inflation • Unemployment • Disposal income • Technological • Government spending on research • Government and industry focus on technological effort • New developments • Speed of technology transfer • Legal • Monopolies legislation • Employment law

  12. LEVELS OF PLANNING (Bracker and Pearson, 1986) Global Corporate plan SBUs, business portfolios, division plans Strategic plan Business level plans Functional level plans Product market plans Production plans Financial plans & Budgets Department plans Time-based plans Programmes & projects Local Single-use plans

  13. CORPORATE STRATEGY • “attempts to define the domain of businesses the firm intends to operate in” • Sense of purpose • Corporate parenting • Portfolio issues • Value adding • Which industries • Becomes international as an organisation is influenced by • Competition, currency, country

  14. BUSINESS STRATEGY • How should we compete in our chosen product markets? • Products/services • Markets • Competition • Advantage

  15. FUNCTIONAL STRATEGIES • How we manage the functions of finance, marketing, operations, human resources and R&D in ways consistent with our international corporate and business strategies • About • resource application • implementation • impact of technology • competitive advantage

  16. THE STRATEGIC MANAGEMENT APPROACH Situation appraisal Review of corporate objectives Situation assessment Monitor progress Clarification of objectives Where are we? Leadership & culture Implementation Corporate strategy Strategic decisions Competitive strategy How are we getting there? Where are we going?

  17. BENEFITS OF STRATEGIC THINKING (Miller and Cardinal, 1994) • Identify more effectively the key success factors inherent in the economics of the business • Segment markets to gain decisive competitive advantages • Base strategies on measurement and analysis of competitive advantage • Anticipate competitors’ responses • Exploit more, different degrees of freedom than competitors • Give investment priority to business/areas that promise competitive advantage

  18. STRATEGIC MANAGEMENT FAILURES • Strategic Management is not something that many companies are thought to be very good at • Mistakes made in recent years: • Misguided strategic choices • Poor strategy implementation • Technical weaknesses • Market complacency • A failure to maximise the potential and contribution of people

  19. FORCES INFLUENCING BUSINESS STRATEGY • Nature of the competitive environment • What do customers/users value? • Does the business unit have competences which allow it to deliver the desired competitive strategy => is competitive advantage likely? • Constraints upon strategy in terms of stakeholder expectations

  20. GROUP TASK • Divide into groups of five individuals • All students should have read the Dyson case study which accompanies the lecture notes • What was the mission/objectives of the Dyson company? • Outline the Corporate, business and functional strategies of Dyson • What type of strategy did James Dyson pursue? • Why was this the most effective strategy? • What are the challenges facing this still young company? • Conduct a PESTLE analysis of the Dyson company • Draw up presentation and present to other groups

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