Strategic Planning

2. Strategic Planning

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

4. 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

5. The Result: • 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,

6. BUSINESS PLAN Answers 3 Critical Q’s: 1.Where are we now? 2.Where do we want to go 3.How do we get there? = Situation Analysis

7. 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?

8. 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

9. 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

10. Intro & Overview of Course • Preliminary Situation Analysis • Organize Companies/ Register w/ Capstone • Select Competitive Strategy • Take theDr. F Management Pledge • Preview your Balanced Scorecard

11. 1stOrganize Companies Register @ http://ww2.capsim.com/login/

12. Strategic Thinking- the ten big ideas Prof Thomas/ Penn St. able to predict final standings w/in 1 place 90% of time –after observing initial group interaction... • 7. Corporate culture & • 8. Leadership craft... • Leaders responsible for assuring strategy links values & vision ...

13. Intro & Overview of Course • Preliminary Situation Analysis • Organize Companies/ Register w/ Capstone • Select Competitive Strategy • Take theDr. F Management Pledge • Preview your Balanced Scorecard

14. 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

15. You can also Formulate Strategy by:Competitive Scope/ MARKET FOCUSNumber & Nature of segments compete w/in-

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

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

18. 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

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

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

21. Porter “What is Strategy” “If you don’t know where you are going any road will get you there.”Lewis Carroll,-- Chapter 6, Alice in Wonderland

22. Corporation Sensors Unit Nano-Tech Unit Cons.Elec. Unit Finance Production Marketing HR / R&D Competitive Strategies Span Level 2 of MGT Corporate-Level :In what business should we compete? Business-Level: How should we compete? Functional-Level : How do we coordinate?

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

24. Strategic Choice: Cost Leadership • Overriding goal = increased efficiency & lower costs relative to rivals • Minimize costs(Marketing, R&D & Production..) • Advantages • A cost leader able to charge lower prices • Even at same price- greater profitability

25. Strategic Choice: Differentiation Create a product that customers perceive as distinct/unique & offer superior quality/service Advantage Customers expect & willing to pay premium prices

26. Strategic Choice: Differentiation Greater Equity = Greater loyalty = Less price sensitivity • Will have significant expenditures in R&D & production…. want/need to make high quality/highly desirable product • Significant expenditures in marketing… develop greater brand equity —thru increased awareness of product quality

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

28. 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

29. Select one of the Six Basic Strategies

30. 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

31. 3rd Level of Strategy Corporate Level Business unit Level Functional Strategy Information systems Research & development Manufacturing Finance Marketing Human resources

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

33. 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

34. Examples of Strategic Alignment

36. 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

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

38. Areas in which you can develop “Distinct Competencies” • MARKETING: Awareness & Accessibility • R&D: Product innovation & design • PRODUCTION: Plant Automation & utilization • Human Resources: Worker Expertise & Training

39. Achieving Competitive Advantage thru Cost-Focused Strategy • Allows for good profit margins on sales while keeping prices low especially in price-sensitive segments… Functional Alignment

40. Differentiator • Seeks to create maximum awareness & brand equity. • Wants to be well known as a maker of high quality/highly desirable products Functional Alignment

41. I Promise to : • Meet customers’ key buying criteria... • Spend $$ at optimal levels & in best channels to achieve my awareness & accessibility objectives... • Align production Capacity & produce products commensurate with Demand... • Maximize production efficiencies w/ • appropriate Levels of Automation • investment in my Company's People (Training & Recruitment) & Processes (TQM & Process Initiatives) • optimal use of 2ND Shift • Deliver adequate Levels of: • Return for Investors (ROE)