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Strategic Planning and Control. Planning. Planning Involves: Determining an organization’s primary objectives and Developing courses of action to attain them The Planning PROCESS is:. Planning. This is because it facilitates: Plans often do and should change

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Strategic Planning and Control

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Strategic Planning and Control


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Planning

  • Planning Involves:

    • Determining an organization’s primary objectives and

    • Developing courses of action to attain them

  • The Planning PROCESS is:


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Planning

  • This is because it facilitates:

  • Plans often do and should change

    • Environmental management concept:

      • Scanning

      • Adapting


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Levels of Planning

HR

Global

Information

Systems

Legal

Research


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Strategic Business Units

  • A set of related businesses that are managed as profit centers

  • Separate Management Teams

  • Separate Resources

  • Separate Sets of Competitors


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Strategic Business Units

  • Phillip Morris

    • Cigarettes

    • Beer

  • Proctor and Gamble

    • Baby Products

    • Coffee

    • Food Products


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Strategy

  • Level 1 - Corporate

    • Macro-level strategy

      • Mission and Goals

        • What business are we in?

        • What businesses should we be in?

        • How should we allocate $ across SBUs?

      • Tool: BCG Growth-Share Matrix


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Corporate Strategy: Starting with Mission and Goals

Mission and

Goals

Mission is formal and overarching statement of the firm’s essential purpose.


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Mission StatementsShould Answer:

  • What businesses are we in?

    • Avoid Myopic Thinking

  • What businesses should we be in?

    • Think strategically about future

  • What do (or should) we do best?

    • Think about competitive strengths


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Goals/Objectives

  • Measurable

  • Communicated

  • Reasonable - Achievable

  • Accepted by those Responsible


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Types of Objectives

  • Dollar or Unit Sales Volume (Capacity)

  • Target Dollar Profit or % Return

  • Market Share

  • Growth

  • Others


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Corporate Strategy Tool: BCG Matrix

  • Two Key Variables

    • Relative Market Share (RMS)

      • Related to Cash Generation


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BCG Growth-Share Analysis

  • Two Key Variables

    • Industry Growth Rate

      • Related to Cash Usage


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BCG Growth-Share Analysis

  • Categorize SBUs by Growth and Share and develop strategies

  • Each category has different characteristics

  • Main focus of management is on ability of SBU to generate cash (broad corporate-level focus)


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Portfolio Categories

?

High

Market

Growth

Rate

Low

High

Low

Relative Market Share


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BCG

  • Question Marks

    • RMS Low but Mkt Growth High

    • Questionable –

    • Require considerable investment and strategic changes to  RMS

    • Too many ???

    • Too few ???


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BCG

  • Stars

    • RMS High and Mkt Growth High

    • Growth costs money

      • Attaining and Maintaining market share, etc.

    • Neither a net user or generator of $

    • Companies usually ______ in Stars as they are future Cash Cows


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BCG

  • Cash Cows

    • RMS High and Mkt Growth Low

    • Leaders in Mature Markets

    • Recall PLC, where leaders profit max at mature phase???

    • Slow Mkt Growth means lower investment requirements, so less cash out

    • High RMS means cash in is high


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BCG

  • Cash Cows

    • Strategically, important to:

      • Utilize a holding strategy but

    • Cash Cows that are starved of both $ and intellectual investment will die

    • Funnel $ to high potential ??? and Stars


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BCG

  • Dog

    • Low RMS and Low Mkt Growth

    • Weak SBU in low growth market

    • Divest unless…


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Portfolio Evolution

?

High

Market

Growth

Rate

Low

High

Low

Relative Market Share


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Portfolio Cash Flows

?

High

Winners!

Market

Growth

Rate

Losers

Low

High

Low

Sources &

Use of Funds

Relative Market Share


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BCG

  • Overarching Goals

    • Balanced Portfolio

      • Cash generators

      • Cash users

    • Adequate nurturing of future Cash Cows

    • Adequate nurturing of current Cash Cows


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Strategy

  • Level 2 – Business Level

    • Mid-level strategy

      • SWOT Analysis

      • What mix of products w/in SBU?

      • Desired positioning?

    • Tool: Product/Market Growth Matrix

      • Which products/segments?

      • Which markets/segments?


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SBU Strategy: SWOT and Beyond

Mission &Goals

Opportunities and

Threats

Emphasis is on

EXTERNAL

Situation

Analysis


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Threats &Opportunities

  • Shifting Buyer Tastes

  • Changing Demographics

  • Changing Consumption Patterns

  • New Technology

  • Government Policy

  • New Competition

  • Others

What is it,

good or bad?


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SWOT Analysis

Mission &Goals

External

Threats &

Opportunities

Strengths and

Weaknesses

Situation

Analysis

Emphasis is on

INTERNAL


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Strengths & Weaknesses

Tough

Appraisal!

  • Distribution

  • Equipment

  • Image & Customer Loyalty

  • Patents

  • Management

  • Labor

  • Productivity

Oak

Solid

Dead

Wood


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SWOT Analysis

SWOT

  • Strengths

  • Weaknesses

  • Opportunities

  • Threats


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SWOT Analysis

  • Critical that SBU MATCH opportunities with strengths

  • Critical that SBU recognizes threats and be proactive


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SBU Tool: Product-Market Growth Matrix

  • Most companies operate with a strong sales and profit growth imperative (Corporate-level objective).

  • BUT, the question remains – “How do we achieve growth?”


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Product-Market Growth Matrix

PRODUCT

Old Product

New Product

Existing

Market

Market

Penetration

Product

Development

MARKET

New

Market

Market

Development

Diversification


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Diversification

  • Conglomerate

    • 1980s saw much of this type

    • New SBUs unrelated to core businesses

      • Pepsico

        • Wilson Sporting Goods

        • North American Van Lines

      • Kraft

        • Duracell


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Diversification

  • Concentric

    • Trend is toward this

    • Divesting of Unrelated SBUs

    • Building with related SBUs

      • Those related to core competencies of the company

        • Distribution

        • Image

        • Manufacturing


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Growing by Shrinking

  • Current Trend is to Divest

  • Many Conglomerate Diversification Moves Proved Disappointing

  • Focussing on Products and Markets where Firms are Knowledgeable

  • Repudiation of the “Financial Acquisition” strategy


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Growing By Shrinking


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McKinsey Study

  • Over the long run ...

  • Product and Market Development Strategies have outperformed ...

  • Diversification Firms


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Strategy

  • Level 3 – Tactical/Functional

    • Micro-level strategy

    • How do we support business level strategy & objectives?

    • Tactical elements at issue here – for marketing:


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Tactical Strategy

Segments and

Targets

  • Product

  • Price

  • Distribution

  • Promotion

Mission &Goals

External

Threats &

Opportunities

Internal

Strengths &

Weaknesses

Identify & Select

Target Segment(s)

Develop the

Marketing Mix

4 P’s


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Strategy

  • Level 4 – Operational

    • Most micro-level strategy

    • Implementation and control

      • Requires

        • Budgets

        • Targets

        • Time-frames


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Budgets, Targets, and Time

Required for Implementation, Assessment and

Control

Mission &Goals

External

Threats &

Opportunities

Internal

Strengths &

Weaknesses

Identify & Select

Target Segment(s)

Develop the

Marketing Mix

Set Budgets, Targets,

and Time-Frame


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Implementation

  • Follow the plan

  • Be consistent

  • Be disciplined

  • Be alert to the need to adapt - sideline adjustments

  • Do Things Right the FIRST time!

  • Customers don’t often forgive!


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Control

  • Measurement of Achievements v. Goals

  • Corrective Actions

    • Modify Actions

    • Adjust Goals

  • Should be Ongoing - Diagnostic and Prescriptive


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