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Strategic Planning. Definition: Strategic Planning=. A series of goal-directed decisions & actions MATCHING your skills & resources (strengths & weaknesses ) w/ market threats & opportunities. EVOLVING MARKET OPPORTUNITIES and/or threats. RESOURCES- & OBJECTIVES. Strategic Planning.

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definition strategic planning
Definition: Strategic Planning=

A series of goal-directed decisions & actions

MATCHING your skills & resources(strengths & weaknesses)

w/ market threats & opportunities

strategic planning

EVOLVING MARKET OPPORTUNITIES and/or threats

RESOURCES-

& OBJECTIVES

Strategic Planning

LONG RUN PROFITABILITY AND GROWTH

the big picture

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
slide6

Consumer

Conditions

Company

Competitors

Begun-Step # 1

Situation & SWOT Analysis

slide7

Situation & SWOT Analysis answers 1st of 3 Critical Questions:

Where are we now- as a company?

you are finding answers re

Consumers

Competitors

Conditions

You are finding answers re:
  • How the market is segmented & the relevant criteria that influence consumers use in their purchasing decisions
  • The nature & magnitude of the competition
  • Existing & emerging Economic & Technological trends that will impact demand, pricing, product design & positioning
slide10

Strategic Planning answers next 2 critical Q’s

2.Where do we want to go?

3.How do we get there?

corp mission vision
Corp. Mission & Vision

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?
slide12

Mission or Purpose is a precise description of what an organization does. It should describe the business the organization is in. It is a definition of “why” the organization exists

A vision is a statement about what your organization wants to become …

A compelling description of the state and function of the organization once it has implemented and achieved the strategic plan…

slide13

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

slide14
“If you don’t know where you are going

any route will get you there.”Chris Bartlett,Harvard Business School

3 rd q encompasses 3 levels of strategy

Corporation

Sensors Unit

Nano-Tech Unit

Cons.Elec. Unit

Finance

Production

Marketing

HR / R&D

3rd Q- Encompasses 3 Levels of Strategy

Corporate-Level :In what business should we compete?

Business-Level: How should we compete?

Functional-Level : How do we coordinate?

slide16

Corporate

Growth Strategy

Business Unit Competitive Strategy

Functional Strategies

R&D

Marketing

Production

Finance

Human Resources

level 1 corporate strategy

Corporation

Level 1-Corporate Strategy

In which businesses do we compete?

Corporation

?

once decided what businesses to compete in need to decide
Once decided what businesses to compete in –need to decide -

what Products & Markets to compete w/& in=

Growth Strategy

the big picture1

Situation/SWOT Analysis

Strategic Planning

Functional Integration

Performance Assessment

The Big Picture
  • Company
  • Consumers
  • Competitors
  • Conditions
    • PEST

Functional Integration

Growth

&Competitive Strategies

  • Profits
  • Mrkt Share
  • ROA
  • ROS
  • ROE
  • Asset T/O
  • Stock
  • Mrkt Cap

Marketing

R&D

Production

HR

Finance

growth strategies
Growth Strategies

P R O D U C T

Present

New

Market Penetration

ProductDevelopment

Present

M A R K E T

Diversification

Market Development

New

slide22

MarketPenetration

Increase market share among existing customers.

MarketDevelopment

Attract new customers to existing products

Product

Development

Create new products for present markets

Concentrateon your primary line of business look for ways to meet growth objectives thru increasing your level of operation in your primary business

slide23

2nd Level of Strategy

Corporate Level

Business unit Level

Functional strategy

Information

systems

Research &

development

Manufacturing

Finance

Marketing

Human resources

level 2 business unit strategy how do we compete

STRATEGIC

BUSINESS

UNIT

MARKET

COMPETITOR

COMPETITOR

COMPETITOR

A

B

C

Level 2: Business Unit Strategy: How do we Compete?

Focus?

Price?

Quality?

slide25

What Advantage can we create & sustain against our competitors?

& w/in which Market Segments should we compete?

slide26
Competitive Strategy is the creation of a unique & valuable position-

The position is based on-

    • Performing the same activities as competitors, but differently

--or performing a different set of activities

  • Porters Generic Strategies
  • Strategies & Mission Statements
the big picture2

Situation/SWOT Analysis

Strategic Planning

Functional Integration

Performance Assessment

The Big Picture
  • Company
  • Consumers
  • Competitors
  • Conditions
    • PEST

Functional Integration

Growth

&Competitive Strategies

  • Profits
  • Mrkt Share
  • ROA
  • ROS
  • ROE
  • Asset T/O
  • Stock
  • Mrkt Cap

Marketing

R&D

Production

HR

Finance

you can formulate strategy based on what competitive advantage you focus o n

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

you can formulate strategy thru your competitive scope number nature of segments compete w in
You can Formulate Strategy thru your Competitive Scope:Number & Nature of segments compete w/in-
generic strategies
Generic Strategies

Competitive Advantage

Cost

Uniqueness

Cost Leadership

Broad

Differentiation

Broadtarget

Competitive Scope

Focused Cost Leadership

Focused Differentiation

Narrowtarget

you can also formulate strategy by riding a products life cycle
& You can also Formulate Strategy by-Riding a Products Life Cycle
  • Adjust Marketing Mix according to natural Drift of products w/in segments-
slide32

Put them all together &…

  • Cost/Quality Differentiation
  • Number & nature of segments compete w/in
  • Riding the Product Life Cycle
competitive strategy matrix
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

competitive strategy matrix1
Competitive Strategy Matrix

Broad Mrkt

Niche Mrkt

Evolving Mrkt

Compete on:

Cost

Product Quality

slide35

This week’s assignments

  • Select w/ which of theSix Basic Strategiesyou are going to compete
  • Draft- your Mission  & Vision statements

Determine Functional Tactics & Objectives

  • Marketing
    • R&D
  • Production
    • HR, TQM
  • Financial
cost leadership strategic choices
Cost LeadershipStrategic Choices
  • A cost leader does not try to be industry innovator
  • The overriding goal is- increased efficiency & lower costs relative to rivals
  • Will seek to minimize costs in marketing, R&D & production
slide37

Cost Leadership

Actions necessary to gain & maintain position:

1. Economies of scale thru utilization of excess capacity.

2. Automation / utilization of robotics in manufacturing processes.

3. Development of efficient distribution networks.

4. Implementation of TQM (Total Quality Management) initiatives.

Example: Dell

business level strategy cost leadership
Business-Level Strategy:Cost Leadership
  • Advantages
    • A cost leader is able to charge lower prices
    • Even at same price more efficient cost leader generates greater profitability
slide40
-- seeks to dominate the price sensitive market segments.
  • --sets prices below all competitors — and still be profitable
slide41
Products will be allowed to age & change in appeal from High End, to Traditional, and eventually Low End buyers.
competitive strategy matrix2
Competitive Strategy Matrix

Broad Mrkt

Niche Mrkt

Evolving Mrkt

Compete on:

Cost

Product Quality

generic business level strategy differentiation
Generic Business-Level Strategy: Differentiation

Create a product that customers perceive as distinct/unique & offer superior quality/service

Advantage

Customers expect & willing to pay premium prices

differentiator
Differentiator
  • Will have significant expenditures in R&D & production….Because you want/need to make high quality/highly desirable product
  • Will have significant expenditures in marketing… Because you need to create maximum awareness & brand equity.
slide45

Differentiation

Actions necessary to gain / maintain position:

1. Developing innovative products/services to broad range of customers.

2. Significant investments in R&D.

3. Capability to generate a series of successful new products over time.

4. Development of flexible manufacturing systems.

Example: Toyota

differentiation advantage
Differentiation Advantage

… as you develop greater brand equity —thru increased product quality & awareness ….

You develop greater brand loyalty….

The greater the loyalty.. the less the price sensitivity

differentiation disadvantages
Differentiation: Disadvantages
  • Difficulty in maintaining long-term distinction in customers’ eyes
    • Agile competitors can quickly imitate
  • Difficulty/expense of maintaining premium pricing– requires greater marketing costs
slide49

3rd Level of Strategy

Corporate Level

Business unit Level

Functional Strategy

Information

systems

Research &

development

Manufacturing

Finance

Marketing

Human resources

level 3 functional strategy
Level 3 Functional Strategy

How do we coordinate?

the big picture3

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

internal strategic alignment
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

for internal strategic alignment to occur
For INTERNAL STRATEGIC ALIGNMENTto occur:
  • Marketing/R&Dmust be operating in a manner that is complementary toProduction
  • Which is complementary toHuman Resources
  • Which is complementary toFinance.
after divining strategy still have task of implementation performance

Marketing Strategy

… after divining strategy still have task of implementation & performance

Organizational

Structure

Human

Resources

Marketing Performance

Communicate

Motivate

Coordinate

Climate and

Culture

Training & Reward

Programs

Implementation

the recurring problem
The Recurring Problem…
  • Only 5% of workforce “on board” w/ 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, 2000

problem separation of strategic planning marketing implementation
Problem: 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

benefits of strategic planning
Benefits of “Strategic Planning”

objectives

  • Guides entire firm regarding -what it is you are trying to do & achieve
  • Unifies numerous strategy-related decisions and organizational efforts

Strategy

Operations

what makes a decision strategic
What makes a decision strategic?
  • Multi-functional in scope & consequences
  • Requires choice & trade-offs, integration & alignment
slide60
In order to execute & achieve selected growth & competitive strategies--Need to coordinate decisions across all Functional domains

Production

R&D

Marketing

HR

Finance

slide67

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

slide68

Distinct competencies needed to achieve selected competitive strategy

Competitive

Advantage*

Distinctive

Competencies

*Achieved when you sustain profits above Industry Average

areas in which you can develop distinct competencies
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
distinct competencies
Distinct Competencies

Competencies in automation & human resources could lead to a competitive advantage incost leadership.

achieving competitive advantage thru cost focused strategy
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

distinct competencies1
Distinct Competencies

Competencies in awareness, accessibility & design could lead to a competitive advantage built upon differentiation

differentiator1
Differentiator
  • Seeks to create maximum awareness & brand equity.
  • Wants to be well known as a maker of high quality/highly desirable products

Functional Alignment

slide74
Virtually all tactical mistakes that are made when implementing strategy

are a consequence of the lack of synchronization of decisions made in at least two functional areas

r d and production breakdown
R&D and Production breakdown
  • You develop a new product but forget to buy plant & equipment for it…the year before it is to be launched…
marketing production finance out of sync
Marketing, Production & Finance out of sync
  • The company takes an emergency loan because inventory levels increase…
marketing r d and production out of sync
Marketing, R&D, and Production out of sync
  • You reposition a product from the High End to the Traditional segment, but do not address their material & labor costs…
everybody is out of sync
Everybody is out of sync!
  • Financial decisions are made before knowing the budget demands of all R&D, Marketing and Production decisions…
slide79

This week’s assignments

  • Select w/ which of theSix Basic Strategiesyou are going to compete
  • Draft- your Mission  & Vision statements

Determine Functional Tactics & Objectives

  • Marketing
    • R&D
  • Production
    • HR, TQM
  • Financial
slide81

Avoid Mission Myopia

Short sightedness by firms that define their business too narrowly

marketing myopia examples
Marketing Myopia Examples

Broad Description:

  • Transportation Co.
  • Power company
  • Entertainment provider

Myopic Description:

  • Railroad company
  • Electricity company
  • Television network
market oriented vision missions
Market Oriented Vision / Missions

PRODUCT-ORIENTED VISION/MISSION STATEMENTS

MARKET-ORIENTED VISION/MISSION

STATEMENTS

COMPANY

RevlonWe make cosmetics.

DisneyWe run theme parks.

Philip Morris We Sell Cigarettes

We sell hope…we accent a

lifestyle & self expression

We make people happy..

by providing fantastic experiences & entertainment

We provide “Life's Simple Pleasures”

Altria

types of objectives
Profitability

Growth

Market share

Social responsibility

Employee welfare

Product Quality

Service

R&D

Diversification

Efficiency

Financial stability

Resource conservation

Mgt & labor development

Types of objectives
mission statement
Mission Statement

We will produce outstanding financial returns by providing totally reliable, competitively superior, global, air-ground transportation of high-priority goods and documents that require rapid, time-certain delivery."

slide88

“PepsiCo’s overall mission is to increase the value of our shareholders’ investment. We do this through sales growth, cost controls and wise investment of resources. We believe our commercial success depends upon offering quality and value to our consumers and customers; providing products that are safe, wholesome, economically efficient and environmentally sound; and providing a fair return to our investors while adhering to the highest standards of integrity.”

slide89

Valuable

>Strategy & Vision Statements

Capstone: Strategies & Mission Statements

http://www.bplans.com/dp/missionstatement.cfm

slide91
Need to begin to determine the basic objectives & specific tactical decisions that need to be made within & across each management domain …in order to successfully implement your growth & competitive strategies
slide92

This week’s assignments

  • Select w/ which of theSix Basic Strategiesyou are going to compete
  • Draft- your Mission  & Vision statements

Determine Functional

Objectives& Tactics

  • Marketing
    • R&D
  • Production
    • HR, TQM
  • Financial
slide97

- No "magic bullet " guaranteed winning strategy. Each simulation has a unique competitive dynamic.

Successful contingent on planning, strategic alignment, teamwork, competitor analysis, & tactical adjustments.