Strategic Planning for Managers
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Strategic Planning for Managers . Contents. Five Tasks of Strategic Planning Factors Shaping the Choice of Strategy Three Tests of Best Strategy Analyzing Industry Environment and Crafting Competitive Strategy Strategy Implementation and Execution.

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Contents

  • Five Tasks of Strategic Planning

  • Factors Shaping the Choice of Strategy

  • Three Tests of Best Strategy

  • Analyzing Industry Environment and Crafting Competitive Strategy

  • Strategy Implementation and Execution

If you find this presentation useful, please consider telling others about our site (www.studyMarketing.org)


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Five Tasks of

Strategic Planning


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Five Tasks of Strategic Planning

Crafting a strategy to achieve the desired outcomes

Forming a strategic vision

Setting objectives

Evaluating performance, monitoring new developments, and initiating corrective adjustments

Implementing and executing the chosen strategy


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Forming a Strategic Vision

  • Very early in the strategy-making process, company managers need to pose a set of questions:

    • "What is our vision for the company — where should the company be headed, what should its future technology-product-customer focus be, what kind of enterprise do we want to become, what industry standing do we want to achieve in five years?"

Forming a strategic vision


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Setting Objectives

  • The purpose of setting objectives is to convert managerial statements of strategic vision and business mission into specific performance targets — results and outcomes the organization wants to achieve.

  • Setting objectives and then measuring whether they are achieved or not help managers track an organization's progress.

Setting objectives


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Strategic Objectives in Four Perspectives

Enhance Long-term Shareholder Value

Improve

Cost Efficiency

Increase Revenue Growth

Financial

Build High Performance Products

Expand

Market Share

Enhance

Brand Image

Customer

Achieve Operational Excellence

Drive Demand

through Customer Relation Management

Implement Good

Environmental Policy

Manage Dramatic Growth through Innovation

Internal Process

Learning & Growth

Develop Strategic Competencies

Build Learning

Culture

Expand Capabilities with Technology


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Crafting Strategy

  • A company's strategy represents management's answers to such fundamental business questions as :

    • whether to concentrate on a single business or build a diversified group of businesses

    • whether to cater to a broad range of customers or focus on a particular market niche

    • whether to develop a wide or narrow product line

    • how to respond to changing buyer preferences

    • how big a geographic market to try to cover

    • how to react to newly emerging market and competitive conditions

    • how to grow the enterprise over the long term.

Crafting a strategy to achieve the desired outcomes


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What Does a Company's Strategy Consist Of?

  • Company strategies concern how:

    • how to grow the business

    • how to satisfy customers

    • how to outcompete rivals

    • how to respond to changing market conditions

    • how to manage each functional piece of the business and develop needed organizational capabilities

    • how to achieve strategic and financial objectives

Crafting a strategy to achieve the desired outcomes


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Strategy Implementation and Execution

  • Strategy implementation concerns the managerial exercise of putting a freshly chosen strategy into place

  • Strategy execution deals with the managerial exercise of supervising the ongoing pursuit of strategy, making it work, and showing measurable progress in achieving the targeted results.

Implementing and executing the chosen strategy


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Strategy Evaluation and Monitoring

  • It is management's duty to stay on top of the company's situation, deciding whether things are going well internally, and monitoring outside developments closely.

  • Marginal performance or too little progress, as well as important new external circumstances, will require corrective actions and adjustments.

Evaluating performance, monitoring new developments, and initiating corrective adjustments


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Strategy Hierarchy

Corporate Strategy

Business Strategies

Strategy hierarchy for

a diversified company

Functional Strategies (R&D, Marketing, Manufacturing, HR, Finance, etc.

Operating Strategies (regions, plants, departments within functional areas)


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Strategy Hierarchy

Business Strategies

Strategy hierarchy for

a single-business company

Functional Strategies (R&D, Marketing, Manufacturing, HR, Finance, etc.

Operating Strategies (regions, plants, departments within functional areas)


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Strategy Hierarchy

Corporate

Strategic Vision

Corporate

Strategic Objectives

Corporate

Strategic Strategy

Business-Level Strategic Vision

Business-Level Strategic Objectives

Business-Level Strategy

Functional

Areas Visions

Functional

Areas Objectives

Functional

Areas Strategies

Operating Unit Visions

Operating Unit Objectives

Operating Unit Strategies


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Factors Shaping

the Choice of Strategy


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Factors Shaping the Choice of Strategy

External Factors

Competitive conditions and industry attractiveness

Company opportunity and threat

Economic, societal, political, and government regulations

The mix of considerations that determines

a company’s strategic situation

Personal ambitions and business philosophies of key executives

Company strengths and weaknesses, competencies and capabilities

Shared values and company culture

Internal Factors


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Factors Shaping the Choice of Strategy

  • What an enterprise can and cannot do strategywise is always constrained by what is legal, by what complies with government policies and regulatory requirements, by what is considered ethical, and by what is in accord with societal expectations and the standards of good social and community citizenship.

Economic, societal, political, and government regulations


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Factors Shaping the Choice of Strategy

  • An industry's competitive conditions and overall attractiveness are big strategy-determining factors.

  • A company's strategy has to be tailored to the nature and mix of competitive factors in play—price, product quality, performance features, service, war­ranties, and so on.

Competitive conditions and industry attractiveness


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Factors Shaping the Choice of Strategy

  • A company's strategy needs to be deliberately aimed at capturing its best growth opportunities, especially the ones that hold the most promise for building sustainable competitive advantage and enhancing profitability.

  • Strategy should also provide a defense against external threats to the company's well-being and fu­ture performance.

Company opportunity and threat


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Factors Shaping the Choice of Strategy

  • One of the most pivotal strategy-shaping internal considerations is whether a company has or can acquire the resources, competencies, and capabilities needed to execute a strategy proficiently.

  • The best path to competitive advantage is found where a firm has competitively valuable resources and competencies, where rivals can't develop comparable capabilities except at high cost or over an extended period of time.

Company strengths and weaknesses, competencies and capabilities


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Factors Shaping the Choice of Strategy

  • Managers do not dispassionately assess what strategic course to steer.

  • Their choices are typically influenced by their own vision of how to compete and how to position the enterprise and by what image and standing they want the company to have.

Personal ambitions and business philosophies of key executives


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Factors Shaping the Choice of Strategy

  • An organization's policies, practices, traditions, philosophical beliefs, and ways of doing things combine to create a distinctive culture.

  • The stronger a company's culture, the more that culture is likely to shape the company's strategic actions, sometimes even dominating the choice of strategic moves.

Shared values and company culture


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Strategic Analysis and Strategic Choices

Analyzing strategically about industry and competitive conditions

What strategic options does the company realistically have?

What is the best strategy?

Analyzing strategically about a company’s own situation


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Strategic Analysis and Strategic Choices

  • The Key Questions

  • What are the industry’s dominant economic features?

  • What is causing the industry’s competitive structure and business environment to change?

  • Which companies are in the strongest/weakest positions?

  • What strategic moves are rivals likely to make next?

  • What are the key factors for competitive success?

  • Is the industry attractive and what are the prospects for above-average profitability?

Analyzing strategically about industry and competitive conditions


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Strategic Analysis and Strategic Choices

  • The Key Questions

  • How well is the company’s present strategy working?

  • What are the company’s strengths, weaknesses, opportunities, and threats?

  • Are the company’s prices and costs competitive?

  • How strong is the company’s competitive position?

  • What strategic issues does the company face?

Analyzing strategically about a company’s own situation


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Three Tests of Best Strategy

The Goodness of Fit Test

The Competitive Advantage Test

The Best Strategy

The Performance Test


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Three Tests of Best Strategy

The Goodness of Fit Test

  • A good strategy has to be well matched to industry and competitive conditions, market opportunities and threats, and other aspects of the enterprise's external environment.

  • At the same time, it has to be tailored to the company's resource strengths and weaknesses, competencies, and competitive capabilities.


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Three Tests of Best Strategy

The Competitive Advantage Test

  • A good strategy leads to sustainable competi­tive advantage.

  • The bigger the competitive edge that a strategy helps build, the more powerful and effective it is.


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Three Tests of Best Strategy

The Performance Test

  • A good strategy boosts company performance.

  • Two kinds of performance improvements are the most telling of a strategy's caliber: gains in profitability and gains in the company's competitive strength and long-term mar­ket position.


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Analyzing Industry Environment

and Designing Competitive Strategy


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Porter’s Five Forces

Buyer Power

Barriers to Entry

Rivalry

Threats of Substitutes

Supplier Power


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The Intensity of Rivalry

  • A larger number of firms

  • Slow market growth

  • High fixed cost

  • High storages costs or highly perishable products

  • Low switching cost

  • Low level of product differentiation

  • Strategic stakes are high

  • High exit barriers

  • A diversity of rivals

  • Industry shakeout

The intensity of rivalry is influenced by the following industry characteristics:


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Barriers to Entry

  • Absolute cost advantages

  • Proprietary learning curve

  • Access to inputs

  • Government policy

  • Economies of scale

  • Capital requirements

  • Brand identity

  • Switching costs

  • Access to distribution

  • Expected retaliation

  • Proprietary products

Entry barriers are influenced by the following factors :


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Threats of Substitutes

  • Switching costs

  • Buyer inclination to substitute

  • Price-performance trade-off of substitutes

Threats of substitutes

are influenced by the following factors :


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Buyer Power

  • Bargaining leverage

  • Buyer volume

  • Buyer information

  • Brand identity

  • Price sensitivity

  • Threat of backward integration

  • Product differentiation

  • Buyer concentration vs. industry

  • Substitutes available

  • Buyers' incentives

Buyer power

is influenced by the following factors :


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Supplier Power

  • Supplier concentration

  • Importance of volume to supplier

  • Differentiation of inputs

  • Impact of inputs on cost or differentiation

  • Switching costs of firms in the industry

  • Presence of substitute inputs

  • Threat of forward integration

  • Cost relative to total purchases in industry

Supplier power

is influenced by the following factors :



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Five Generic Competitive Strategies

Low Cost

Differentiation

Overall Low Cost Leadership Strategy

Differentiation Strategy

Broad Market Segment

Best Cost Strategy

Focused Low Cost Strategy

Focused Differentiation Strategy

Narrow Market Segment


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Five Generic Competitive Strategies

Overall Low Cost Leadership Strategy

Appealing to a broad spectrum of customers based on being the overall low-cost provider of product and service

Broad Differentiation Strategy

A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition


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Five Generic Competitive Strategies

Overall Low Cost Leadership Strategy

Appealing to a broad spectrum of customers based on being the overall low-cost provider of product and service

Broad Differentiation Strategy

A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition


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Five Generic Competitive Strategies

Best Cost Strategy

  • Giving customers more value for the money by incorporating good-to-excellent product attributes at a lower cost than rivals

  • The target is to have the lowest (best) costs and prices compared to rivals offering products with comparable upscale attributes




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Strategy Implementation

Building a capable organization

Linking budget to strategy

Designing strategy-supportive reward system

Establishing strategy-supportive policies and procedures

Effective

Strategy Execution

Instituting best practices and commitment to continuous improvement

Creating a strategy-supportive corporate culture

Installing information system to support strategy execution

Exerting strategic leadership

HR & Organization Development Factor

System Factor


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Building a Capable Organization

  • Staffing the organization

  • Putting together a strong management team

  • Recruiting and retaining talented employees

Building a capable organization

  • Building Core Competencies and Capabilities

  • Developing competence/capability portfolio suited to current strategy

  • Updating and reshaping the portfolio as external conditions and strategy change

  • Structuring the Organization and Work Effort

  • Organizing business function and processes, value chain activities, and decision making


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Strategy-supportive Reward System

  • Strategy-supportive motivational practices and reward systems are powerful management tools for gaining employee buy-in and commitment.

  • The key to creating a reward system that promotes good strategy execution is to make strategically relevant measures of performance the dominating basis for designing incentives, evaluating individual and group efforts, and handing out rewards.

Designing strategy-supportive reward system


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Strategy-supportive Corporate Culture

  • Building a strategy-supportive culture is important to successful strategy execution because it produces a work climate and organizational esprit de corps that thrive on meeting performance targets and being part of a winning effort.

Creating a strategy-supportive corporate culture


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Strategic Leadership

  • Strategic leaders encourage people to be innovative in order to keep the organization responsive to changing conditions, alert to new opportunities, and anxious to pursue fresh initiatives.

  • Strategic leaders also actively push corrective actions to improve strategy execution and overall strategic performance.

Exerting strategic leadership


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Linking Budget to Strategy

  • Reworking the budget to make it more strategy-supportive is a crucial part of the implementation process because every organization unit needs to have the people, equipment, facilities, and other resources to carry out its part of the strategic plan.

Linking budget to strategy


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Strategy-supportive Policy

  • Prescribing new or freshly revised policies and operating procedures aids the task of implementation (1) by promoting consistency in how particular strategy-critical activities are performed in geographically scattered operating units and (2) by helping to create a strategy-supportive work climate and corporate culture.

Establishing strategy-supportive policies and procedures


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Continuous Improvement

  • Competent strategy execution entails visible, unyielding managerial commitment to best practices and continuous improvement.

  • Benchmarking, the discovery and adoption of best practices, and six sigma initiatives all aim at improved efficiency, better product, and greater customer satisfaction.

Instituting

best practices and commitment to continuous improvement


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Information Support System

  • Company strategies can’t be implemented well without a number of support system to carry on business operations.

  • Well-conceived, state-of-the-art support system not only facilitate better strategy execution but can also strengthen organizational capabilities enough to provide a competitive edge over rivals.

Installing information system to support strategy execution


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Recommended Further Readings

  • Arthur Thompson and A.J. Strickland III, Strategic Management : Concept and Cases, McGraw-Hill

  • Michael Porter, Competitive Strategy : Techniques for Analyzing Industries and Competitors, Free Press



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