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Strategic Planning: Key to Long-term Profitability and Growth

Learn how strategic planning aligns goals with market opportunities to drive profit and growth. Discover the benefits, challenges, and critical components of successful strategic planning efforts.

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Strategic Planning: Key to Long-term Profitability and Growth

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  1. Strategic Planning

  2. Definition: Strategic Planning= A series of goal-directed decisions & actions matching your skills & resources (strengths & weaknesses) w/ market threats & opportunities

  3. EVOLVING MARKET OPPORTUNITIESand/or threats RESOURCES & OBJECTIVES Strategic Planning LONG RUN PROFITABILITY AND GROWTH

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

  5. Benefits of “Strategic Planning” objectives • Guides entire firm regarding -what it is you are trying to do & achieve • Unifies numerous strategy-related decisions and organizational efforts Strategy Operations

  6. The Problem… • Only 5% of workforce aware of “the” strategy • Only 25% of managers have incentives linked to strategy • 60% of organizations don't link budgets & strategy • 85% of executive teams spend <1 hour/ month discussing strategy • 90% fail to execute strategy successfully Robert S. Kaplan and David P. Norton The Strategy-Focused Organization,

  7. Separation of Strategic Planning & Marketing Implementation Very Much Strategic Planning • Commitment • Understanding • Responsibility Time Spent Strategy Implementation Very Little Chief Executive Officer Mid-level Managers Customer Contact

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

  9. Forces you to make choices on what you will & won’t do

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

  11. Situation & SWOT Analysis answers 1st of 3 Critical Questions:

  12. Strategic Planning answers next 2 critical Q’s 1.Where are we now? 2.Where do we want to go? 3.How do we get there?

  13. Org. goals & objectives encapsulated in Mission & Vision Statements: Answers Question # 2: 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?

  14. Final Question answered by Strategic Planning: 1.Where are we now? 2.Where do we want to go? 3.How do we get there? *Growth, Competitive & Functional Strategies

  15. Corporation Sensors Unit Nano-Tech Unit Cons.Elec. Unit Finance Production Marketing HR / R&D Growth, Competitive & Functional Strategies Span 3 Levels of MGT Corporate-Level :In what business should we compete? Business-Level: How should we compete? Functional-Level : How do we coordinate?

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

  17. DIAGEO PLC Burger King Guinness Old El Paso Mexican food Green Giant Liquor Textron Bell helicopters E-Z-GO golf cars Jacobsen turf care United Technologies Pratt & Whitney aircraft engines Cessna Aircraft Carrier Heating & AC Otis Elevators

  18. Once decided what businesses to compete in –need to decide - what Products & Markets to compete w/& in= Growth Strategy

  19. Growth Strategies Present Products New Products Market Penetration- Increase share among existing customers. Product Development Create new products for present markets Present Markets Market Development Attract new customers to existing products New Markets Diversification new products… new markets… new alliances

  20. 2nd Level of Strategy Corporate Level Business unit Level Functional strategy Information systems Research & development Manufacturing Finance Marketing Human resources

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

  22. What Advantage can we create & sustain against our competitors? & w/in which Market Segments should we compete?

  23. Strategic Thinking- the ten big ideas • 6. Resource allocation models – • Porter: strategic choices are set of basic generic strategies • (low cost, differentiation, market focus)

  24. Porter “What is Strategy” • Porters Generic Strategies • Strategies & Mission Statements • Apple Versus the Strategy Professors • Amazon, Apple, and the beauty of low margins

  25. Cost: Design, produce, market more efficiently than competitors You can Formulate Strategy based on what Competitive advantage you focuson: Differentiation: Deliver unique & superior value in terms of product quality, features, service

  26. You can Formulate Strategy thru your Competitive Scope:Number & Nature of segments compete w/in-

  27. Generic Strategies Competitive Advantage Cost Uniqueness Cost Leadership Broad Differentiation Broadtarget Competitive Scope Focused Cost Leadership Focused Differentiation Narrowtarget

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

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

  30. 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

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

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

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

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

  35. 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

  36. 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

  37. 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

  38. 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.

  39. 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

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

  41. match customers ideal criteria for positioning, age, and reliability.

  42. 3rd Level of Strategy Corporate Level Business unit Level Functional Strategy Information systems Research & development Manufacturing Finance Marketing Human resources

  43. Level 3 Functional Strategy How do we coordinate?

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

  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. For INTERNAL STRATEGIC ALIGNMENTto occur: • Marketing/R&Dmust be operating in a manner that is complementary toProduction • Which is complementary toHuman Resources • Which is complementary toFinance.

  47. Examples of Strategic Alignment

  48. Distinctive Competencies When all decisions made by & within all functional areas are in sync w/ one another, As well as w/ your overall strategic direction -- you achieve… Distinctive Competencies

  49. Distinct competencies needed to achieve selected competitive strategy Competitive Advantage* Distinctive Competencies *Achieved when you sustain profits above Industry Average

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