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Chapter 11 Strategic Planning System and Current Issues

Chapter 11 Strategic Planning System and Current Issues. LEARNING OBJECTIVES. After reading the whole chapter, you should be able to: Understand the reason having a sound strategic planning system Design a good strategic planning system

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Chapter 11 Strategic Planning System and Current Issues

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  1. Chapter 11Strategic Planning System and Current Issues

  2. LEARNING OBJECTIVES • After reading the whole chapter, you should be able to: • Understand the reason having a sound strategic planning system • Design a good strategic planning system • Understand the purpose of each of the component of the system • Explain the latest development related to the field of strategic planning

  3. STRATEGIC PLANNING SYSTEM • Defined as an aggregation of components that because of their activities, the process of strategic planning can be run effectively and efficiently. • It has the following components: • The strategist • The strategic planner • The strategic planning department • Linkages • Time frame • Levels of formality • Degree of completeness

  4. THE STRATEGIST (1) • This is the most important personnel in the system • He will be the ultimate person that will make the final strategic decision • Usually he is the major share holder or the owner • Or proxy for the major shareholder, he being the son, trusted partner, most knowledgeable, most experience and highly respected

  5. THE STRATEGIC PLANner (2) • A good system needs a good strategic planner • He performs all the strategic planning activities that the strategist delegates or is not able to do • There are three main roles that the strategic planner is expected to do. He can play the role of: • – Strategist: do the final strategic decision and be accountable • – An analyst: helps retrieve and obtain relevant data to be analysed and used by the strategic planning team • – A catalyst: where he coordinates all the activities related to strategic planning and provide secretarial services to come up finally with the strategic plan document

  6. STRATEGIC PLANNING DEPARTMENT(3) • This is where all personnel involved in the strategic planning activities are housed together with the head • The size in terms of number of personnel varies amongst organizations • The number varies from 1 to 25 • Some departments incorporate personnel that are involved with quality, international bureau and legal • The department reports directly to the CEO • The location of the department should be nearest to the CEO; where there have been seen the department is just next door to the CEO

  7. LEVELS OF FORMALITY (4) Answering the question of “how structured is the process”: 1. Fixed personnel doing the job 2. Certain format of write-up need to be followed 3. Planned schedule throughout the year for strategic planning activities 4. Hard copy made available to relevant personnel

  8. LINKAGES (5) “The strategic plan is the Master of all plans” Sequentially, a strategic plan should be ready first. This is followed by the other plans such as: 1. Functional plans; operations, finance, marketing, human resource 2. Operational plans: quality control, resource planning, inventory plans 3. Floor level plans: machine replacement, layout changes, machine sequence, process flow All plans are linked to the new strategic focus. Only then will a strategic plan be successful.

  9. TIME FRAME (6) • Most strategic plans started with a 5-year time horizon • But today 3-year time horizon is common • 10-year strategic plan still exists for certain industries like heavy capital companies like oil and gas, ship building, power companies

  10. TIME FRAME (6) (cont.) • “…if we can’t even predict the price of rubber in the commodity market tomorrow, it is ridiculous to have a strategic plan for the next 5 years!” Exclaimed Guthrie’s Plantation Chairman (Tan Sri Ani) during one of his opening speech in a Commodity Market Conference in Kuala Lumpur in 1994 • A rolling plan is recommended to absorb the dynamism of changes • A 3-year rolling plan means that the plan is reviewed every year and is always for the next three year period

  11. THE ROLLING PLAN

  12. LEVEL OF COMPLETENESS (7) • It is the system’s last component from the classical list • If all 6 other components exist, then the level of completeness is said to be complete • A system where • The strategist knows his role • The strategic planner provides all the assistance required • The department delivers • All the other plans are linked closely • A high level of formality exists • The time period is appropriate (a 3-year rolling plan) • Then the level of completeness of the system would be considered as high • A high level of completeness gives a high level of efficiency and effectiveness of performing the strategic planning process

  13. TRIGGER POINT • A new component added to handle the turbulent environment • Incidents not forecastable and thus unplanned need to be handled by this trigger point mechanism • This is a culture and embedded in the organization • The personnel react to a strategic issue instinctively and the results favour the organization • The organization recognizes and appreciate the unplanned reaction as strategically significant • It brings the organization to a new strategic advantage position

  14. CURRENT ISSUES IN STRATEGIC MANAGEMENT • There are many topics that can be included but within the space available these are selectively chosen • 1. Globalization • 2. Customer’s world • 3. Mass customisation • 4. Balance score card • Business process • re-engineering • 6. Cockpit management • 7. Knowledge management 8. Jumping the curve 9. Technology 10. Nanotechnology 11. Genetic engineering 12. Bacterial factory 13. Gas hydrate 14. Precision agriculture

  15. CURRENT ISSUES IN STRATEGIC MANAGEMENT (cont.) • Globalization • Globalization is here to stay • Entrepreneurs and limited market are suddenly exposed to borderless market • Innovativeness and creativity of individuals will dominate • Protectionism of monopolistic companies is suddenly exposed and efficiency and productivity becomes critical

  16. CURRENT ISSUES IN STRATEGIC MANAGEMENT (cont.) • Mergers are common to face the multinationals but the availability of the world market can now be exploited • Protectionism is still strong in some countries, but it is not sustainable • Human migration, capital movement and international trade are the drivers that will make lifestyle probably be the same around the world

  17. CURRENT ISSUES IN STRATEGIC MANAGEMENT (cont.) • 2. Customers’ World • Customer satisfaction is the ultimate end • Make satisfactory returns but focus on customer satisfaction • The culture of customer focus by the company in every aspect • Customer satisfaction is to provide the product or service at a higher expectation than the customer • The bigger the gap, satisfaction will be more • Going for the “wow” level of satisfaction will result in a lifelong memorable experience • Customer loyalty might set in easier than anticipated

  18. CURRENT ISSUES IN STRATEGIC MANAGEMENT (cont.) • 3. Mass Customisation • Produce at a cost of mass production • But customize the service or product • Market share will increase • With better customer satisfaction score and perhaps another market niche • Provide a product or service at a relatively cheaper price but meets the expectation of the customer • Possible today because of the standardization of process, design, features, parts and variations which ultimately will result in reduction of costs

  19. CURRENT ISSUES IN STRATEGIC MANAGEMENT (cont.) • 4. Balance Score Card • Not new but still important principle, i.e. several methods of measuring performance • The general four perspectives are: • Financial • Learning • Customer • Internal process • Variations are many and need to fit the circumstances • Government and non-profit organization would not consider finance as critical • Academic institution would prefer to have curriculum quality as one important factor and could add to the four

  20. CURRENT ISSUES IN STRATEGIC MANAGEMENT (cont.) • 5. Business Process Reengineering • Remember the quote: • a. “It is not the question of is it effective? But have you implemented it?” • or • b. “Not understanding BPR is not a sin, but not practising it is” • BPR is “the re-designing the business process to achieve a dramatic improvement in business performance” • Customers demand now include “speed” and they are willing to pay for it • This is made possible because of development in IT • Processing time is reduced drastically

  21. CURRENT ISSUES IN STRATEGIC MANAGEMENT (cont.) • Principles used to shorten the process flow time are: (i) to condense, (ii) combine, (iii) remove, (iv) make them run parallel, (v) minimize the number of personnel involved by training and empowerment, (vi) document flow to each department minimized by processing only the value-added activities, and (vii) any data entry must be done correctly the first time • Enabler is the IT capabilities • Data once entered and stored intelligently can be assessed and used by different personnel anytime, decisions shared, and disseminated instantly and done electronically

  22. CURRENT ISSUES IN STRATEGIC MANAGEMENT (cont.) • 6. Cockpit Management • Because of IT capabilities, data is: • Stored and managed • into a central system and • all relevant information made available within the cockpit • Similar as in an aeroplane cockpit where the pilot has all the information needed to fly the plane and within his reach • The CEO need to manage the running of the corporation by having at his control information that will help him make all the critical decisions.

  23. CURRENT ISSUES IN STRATEGIC MANAGEMENT (cont.) • Basically it is a board room setting • with a four-wall display system: • Blue wall: for providing critical indicators on internal processes and the employees) • Black (for financial data and reports) • Red (for external market, clients and environmental information) • White (for strategic projects, objectives and targets) • With a touch of a button, the various displays will show all the relevant data necessary for: • Monitoring • Control • Immediate decision and in real time

  24. COCKPIT MANAGEMENT CHART

  25. CURRENT ISSUES IN STRATEGIC MANAGEMENT • 7. Knowledge Management • Knowledge need to be managed because of data overflow • Major components of KM: • Acquisition • Creation • Storage • Sharing • Forms of knowledge: • Tacit and • Explicit • Rich KM culture in organization will give competitive advantage

  26. CURRENT ISSUES IN STRATEGIC MANAGEMENT(cont.) • 7. Jumping the Curve • A company might not be able to ride on a product life cycle (or S curve) forever • The decision to start a new curve is considered crucial • At C when you are sure that your current product curve is confirmed to be on the way down (brown curve) • Or at B when you are at the peak and going down (brown curve) or • Think of initiating a new one when you are at your best (green curve position A)

  27. JUMPING THE CURVE

  28. CURRENT ISSUES IN STRATEGIC MANAGEMENT(cont.) • 8. Technology • Like it or not, today’s business and the future are going to be influenced significantly by technology • At least the company should be aware of the recent technology development

  29. CURRENT ISSUES IN STRATEGIC MANAGEMENT(cont.) • Other than the computer technology and the related IT systems, there are other technological developments that are not directly related to management but somehow are going to play a significant role in the future businesses • Examples: • Nanotechnology • Genetic engineering • Bacterial factory • Gas hydrate • Precision agriculture

  30. CURRENT ISSUES IN STRATEGIC MANAGEMENT(cont.) • 9. Nanotechnology • One of the most influencing technological factor of the future • Today’s microscopic technology, can observe molecules and atom size • Then the ability to prepare small molecules to almost any structure to meet the needs as in medicine, agriculture etc. • (Through precise engineering technology), imagine the potential of this technology in the future. Webpage reference on this topic is quite infinite and managers need to know that future materials are going to be dictated by this technology

  31. CURRENT ISSUES IN STRATEGIC MANAGEMENT(cont.) 10. Genetic Engineering It is the capability to modify or manipulate an organism’s genes

  32. CURRENT ISSUES IN STRATEGIC MANAGEMENT(cont.) • 11. Bacterial Factory • Able to introduce genes into a bacteria, and the bacteria will produce same genetic code as the genes • Anti-malaria vaccine at one time depended on one species of plant which is only found in the highlands of China and • It took years to grow • Small quantity and very costly • Found that bacteria Escherichia coli can be used as a factory to produce the required antibiotics • This is cheaper thus all antibiotics in medicine are expensive • The future of health for mankind looks better

  33. CURRENT ISSUES IN STRATEGIC MANAGEMENT(cont.) • 13. Gas Hydrate • Mineral energy is running out of supply • Efforts have already been made to look for alternative sources of energy as in nuclear, hydro, solar, waves, wind, and even tapping the energy from typhoons, hurricanes and monsoons • But recently this chemical, which is methane bonded by water, is available in the earth’s crust are more than five times the reserves of coal, oil and gas combined together • It is a potentially large source but the technology to harvest has yet to be found

  34. CURRENT ISSUES IN STRATEGIC MANAGEMENT(cont.) • 14. Precision Agriculture • Every activity is geared towards optimization • From agronomical, technical, environmental and economical perspectives • Ultimate aim of sustainability and ecological friendly • Able to calculate the biological needs of a tree and provide exactly that amount without any excess / wastage

  35. CURRENT ISSUES IN STRATEGIC MANAGEMENT(cont.) • Others • Depend on the interest of the reader • Some suggestions include: • Airborne network • Silicon photonics • Metabolomics • Magnetic resonance force microscopy • Universal memory • Environmatics • Cell phone viruses • Biomechatronics • Artificial intelligence • Communications • Computers • Cyborgs • Smart cars • Smart homes • Space exploration • Virtual reality • Wearable computers

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