Chapter 5

1. Chapter 5 Strategic Planning in a Global Environment Pamela S. Lewis Stephen H. Goodman Patricia M. Fandt Slides Prepared by Bruce R. Barringer University of Central Florida ©2001 South-Western College Publishing

2. Learning ObjectivesSlide 1 of 2 1. Define strategic planning and describe its purpose and benefits. 2. Explain the four stages of the strategic planning process. 3. Describe strategic analysis as a part of the strategic planning process. 4. Discuss the purpose of the strategic formulation as part of the strategic planning process.

3. Learning ObjectivesSlide 2 of 2 5. Describe strategy in terms of grand strategy, generic strategy, and international strategy. 6. Explain the role of strategy implementation in the strategic planning process. 7. Describe strategic control systems. 8. Explain how advances in information technology have affected strategic planning. 9. Discuss how tomorrow’s manager can achieve success through strategic planning.

4. Strategic Planning Defined The process by which an organization makes decisions and takes actions that affect its long-run performance.

5. Strategic Plan A strategic plan is the output of the strategic planning process. An organization’s strategic plan provides direction by defining its strategic approach to business.

6. Benefits of Strategic PlanningSlide 1 of 2 • Economic • Organizations that plan strategically outperform those that do not. • Behavioral • An increased likelihood of identifying organizational and environmental conditions that may create problems in the long run. • Better decisions as a result of the group decision-making process.

7. Benefits of Strategic PlanningSlide 2 of 2 • Behavioral • More successful implementation of the organization’s strategy because organizational members who participated in the planning process understand the plan and are more willing to change.

8. Strategic Planning as a ProcessSlide 1 of 3 Strategic analysis Strategy formulation Strategy implementation Strategic control Feedback

9. Strategic Planning as a ProcessSlide 2 of 3 • Strategic analysis • What is the current position of the organization? • Strategy formulation • Where does the organization want to be? • Strategy implementation • How can the organization get to where it wants to be?

10. Strategic Planning as a ProcessSlide 3 of 3 • Strategic control • How will the organization know when it has arrived?

11. Strategic AnalysisSlide 1 of 5 The purpose of strategic analysis is to evaluate the present situation of the organization. This requires three primary activities: Assessing the Mission of the Organization Internal Environmental Analysis External Environmental Analysis

12. Strategic AnalysisSlide 2 of 5 • Assessing the Mission of an Organization • The mission of an organization reflects its fundamental reasons for existence. • Although mission statements vary greatly among firms, every mission statement should describe three primary aspects of the organization: • Its primary products or services. • Its primary target markets. • Its overall strategy for ensuring long-term success.

13. Strategic AnalysisSlide 3 of 5 • Conducting an Internal Analysis • Purpose is to identify assets, resources, skills, and processes that represent either strengths or weaknesses for the organization. • Evaluating the External Environment • Purpose is to identify those aspects of the environment that represent either an opportunity or a threat for the organization.

14. Strategic AnalysisSlide 4 of 5 • Identified by Internal Analysis • Strengths • Aspects of the organization’s operations that represent potential competitive advantages or distinctive competencies. • Weaknesses • Areas that are in need of improvement.

15. Strategic AnalysisSlide 5 of 5 • Identified by External Analysis • Opportunities • Those environmental trends on which the organization can capitalize and improve its competitive position. • Threats • Conditions that jeopardize the organization’s ability to prosper in the long term.

16. Areas That Should Be Evaluated in an Internal Analysis Management Capabilities Information Technology Marketing Finance Research & Development Human Resources

17. Areas That Should Be Evaluated in an External AnalysisSlide 1 of 3 • General Environment • Includes environmental forces that are beyond the influence of the organization and over which it has no (or little) control. • Task Environment • Includes environmental forces that are within the organization’s operating environment and may be influenced to some degree.

18. Areas That Should Be Evaluated in an External AnalysisSlide 2 of 3 General Environment Economic Factors Technological Factors Sociocultural Factors Political-Legal Factors

19. Areas That Should Be Evaluated in an External AnalysisSlide 3 of 3 Task Environment Competition Customers Resource Availability

20. Strategy FormulationSlide 1 of 8 • Strategy Formulation • Once the strategic analysis is completed and the current position of the organization has been assessed, corporate and business strategy can be formulated. • The steps in strategy formulation include: • Casting the vision for the organization. • Setting strategic goals. • Identifying strategic alternatives. • Evaluating and choosing strategy.

21. Strategy FormulationSlide 2 of 8 • Casting the Vision for the Organization • Central to any strategic plan is the development of a vision for the organization. • While a mission statement describes the products, services, and target markets for an organization, a vision statement describes what the organization aspires to be in the long run.

22. Strategy FormulationSlide 3 of 8 • Setting Strategic Goals • Very broad statements of the results that an organization wishes to achieve in the long run. • Relate to the mission and vision of the organization and specify the level of performance that the organization wants to achieve.

23. Strategy FormulationSlide 4 of 8 • Identifying Strategic Alternatives • Developed in light of the mission of the organization, its strengths, weaknesses, opportunities, and threats, and its vision and strategic goals. • Three ways of defining strategic alternatives: • Grand strategy • Generic strategy • International strategy

24. Strategy FormulationSlide 5 of 8 • Grand Strategy • A comprehensive, general approach for achieving the strategic goals of an organization. • Grand strategies fall into three broad categories: • Stability strategies - intended to ensure continuity in the operations and performance of the organization. • Growth strategies - designed to increase the sales and profits of the organization. • Retrenchment strategies - designed to reverse negative sales and profitability trends.

25. Strategy FormulationSlide 6 of 8 • Generic Strategy • Reflect the primary way in which an organization competes in its markets. • Generic strategies are commonly referred to as: • Cost leadership - designed to compete on the basis of price. • Differentiation - designed to compete by offering products or services that are differentiated from those of competitors in some way. • Focus - designed to avoid competing in broad markets by targeting a narrow market segment.

26. Strategy FormulationSlide 7 of 8 • International Strategy • Organizations choose to engage in international business activity for a variety of reasons. • An organization that pursues an international strategy must make decisions about both its mode of entry into international markets and the focus of it strategy.

27. Strategy FormulationSlide 8 of 8 • International Strategy Issues • Mode of Entry • Ways of entering an international market. • Potential modes of entry include exporting, contractual relationships, joint ventures, strategic alliances, and direct investment. • Multidomestic vs. Global Strategic Focus • Multidomestic - development of an independent strategy for each market. • Global - development of a common strategy across foreign markets.

28. Strategy ImplementationSlide 1 of 4 The importance of strategy implementation should never be underestimated, for the best-formulated strategy is worthless if it cannot be implemented effectively.

29. Strategy ImplementationSlide 2 of 4 • Formulating Functional Strategy • Functional strategies provide action plans for strategy implementation and put corporate and business strategy into operation by defining the activities needed for implementation. • The most significant challenge lies in coordinating the activities of the various work groups that must work together to implement the strategy.

30. Strategy ImplementationSlide 3 of 4 • Institutionalizing Strategy • While functional strategies are essential to the strategy implementation process, it is also important that the strategy be institutionalized within the organization. • Institutionalizing a strategy means that every member, work group, department, and division of the organization subscribes to and supports the organization’s strategy with its plans and actions.

31. Strategy ImplementationSlide 4 of 4 • Organizational Attributes that Should Facilitate the Implementation of a Firm’s Strategy • Organizational structure • Organizational culture • Organizational leadership

32. Strategic ControlSlide 1 of 2 • Strategic Control • The last stage of the strategic planning process is strategic control. • Strategic control involves monitoring the implementation of the strategic plan and ensuring quality and effectiveness in terms of organizational performance.

33. Strategic ControlSlide 2 of 2 • Feedforward Controls • Designed to identify changes in the external environment or the internal operations of the organization that may affect its ability to fulfill its mission and meet its strategic goals. • Feedback Controls • Compare the actual performance of the organization to its planned performance.

34. Information Technology and Strategic Planning The increasing availability of information technology has had a tremendous impact on the ability of organizations to develop effective strategic plans.

35. Tips for Effective Strategic PlanningSlide 1 of 3 • Use a participatory approach to planning where possible. • Recognize the importance of thorough and accurate assessment of the current situation of the organization. A plan will be only as good as the analysis on which it is based. • Make sure the mission statement is a working document that provides direction for the members of the organization.

36. Tips for Effective Strategic PlanningSlide 2 of 3 • Strategic goals serve as targets for achievement. Make sure they are measurable, specific, and realistic. • Strategy should be designed to provide the organization with a distinctive competitive advantage in the long term. Never lose sight of that imperative.

37. Tips for Effective Strategic PlanningSlide 3 of 3 • Strategy is meaningless if it is not implemented well. Ensure that you plan for successful implementation all along the way. • Never underestimate the importance of strategic control. It is the only means of ensuring that the company is on track.