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 • Environmental management concept: • Scanning • Adapting
Levels of Planning HR Global Information Systems Legal Research
Strategic Business Units • A set of related businesses that are managed as profit centers • Separate Management Teams • Separate Resources • Separate Sets of Competitors
Strategic Business Units • Phillip Morris • Cigarettes • Beer • Proctor and Gamble • Baby Products • Coffee • Food Products
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
Corporate Strategy: Starting with Mission and Goals Mission and Goals Mission is formal and overarching statement of the firm’s essential purpose.
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
Goals/Objectives • Measurable • Communicated • Reasonable - Achievable • Accepted by those Responsible
Types of Objectives • Dollar or Unit Sales Volume (Capacity) • Target Dollar Profit or % Return • Market Share • Growth • Others
Corporate Strategy Tool: BCG Matrix • Two Key Variables • Relative Market Share (RMS) • Related to Cash Generation
BCG Growth-Share Analysis • Two Key Variables • Industry Growth Rate • Related to Cash Usage
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)
Portfolio Categories ? High Market Growth Rate Low High Low Relative Market Share
BCG • Question Marks • RMS Low but Mkt Growth High • Questionable – • Require considerable investment and strategic changes to RMS • Too many ??? • Too few ???
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
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
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
BCG • Dog • Low RMS and Low Mkt Growth • Weak SBU in low growth market • Divest unless…
Portfolio Evolution ? High Market Growth Rate Low High Low Relative Market Share
Portfolio Cash Flows ? High Winners! Market Growth Rate Losers Low High Low Sources & Use of Funds Relative Market Share
BCG • Overarching Goals • Balanced Portfolio • Cash generators • Cash users • Adequate nurturing of future Cash Cows • Adequate nurturing of current Cash Cows
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?
SBU Strategy: SWOT and Beyond Mission &Goals Opportunities and Threats Emphasis is on EXTERNAL Situation Analysis
Threats &Opportunities • Shifting Buyer Tastes • Changing Demographics • Changing Consumption Patterns • New Technology • Government Policy • New Competition • Others What is it, good or bad?
SWOT Analysis Mission &Goals External Threats & Opportunities Strengths and Weaknesses Situation Analysis Emphasis is on INTERNAL
Strengths & Weaknesses Tough Appraisal! • Distribution • Equipment • Image & Customer Loyalty • Patents • Management • Labor • Productivity Oak Solid Dead Wood
SWOT Analysis SWOT • Strengths • Weaknesses • Opportunities • Threats
SWOT Analysis • Critical that SBU MATCH opportunities with strengths • Critical that SBU recognizes threats and be proactive
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?”
Product-Market Growth Matrix PRODUCT Old Product New Product Existing Market Market Penetration Product Development MARKET New Market Market Development Diversification
Diversification • Conglomerate • 1980s saw much of this type • New SBUs unrelated to core businesses • Pepsico • Wilson Sporting Goods • North American Van Lines • Kraft • Duracell
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
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
McKinsey Study • Over the long run ... • Product and Market Development Strategies have outperformed ... • Diversification Firms
Strategy • Level 3 – Tactical/Functional • Micro-level strategy • How do we support business level strategy & objectives? • Tactical elements at issue here – for marketing:
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
Strategy • Level 4 – Operational • Most micro-level strategy • Implementation and control • Requires • Budgets • Targets • Time-frames
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
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!
Control • Measurement of Achievements v. Goals • Corrective Actions • Modify Actions • Adjust Goals • Should be Ongoing - Diagnostic and Prescriptive