module 7 – strategic planning chapter 4. learning objectives lo1 lo1 summarize the basic steps in...

Module 7 – Strategic Planning

Chapter 4

Learning Objectives

LO1 Summarize the basic steps in any planning processLO2 Describe how strategic planning should be

integrated with tactical and operational planningLO3 Describe how strategy is base on analysis of the

external environment and the firm’s strengths and weaknesses.

LO4 Discuss how companies can achieve competitive advantage through business strategy

4-2

Learning Objectives (cont.)

LO5 Describe the keys to effective strategy implementation

LO6 Explain how to make effective decisions as a manager.

LO7 Summarize principles for group decision making.

4-3

Basic definitions

• Strategy– “pattern of actions and resource allocations to

achieve the goals of the organization”

Basic definitions

• Strategic goals• Strategic planning• Strategic management

Basic Definitions

• "Strategy is the direction and scope of an organization over the long-term, and which enables the organization to achieve advantage through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations.”

Basic definitions

• (Stakeholders)– A person, group, or organization that has direct or

indirect stake in an organization because it can affect or be affected by the organization's actions, objectives, and policies.

– Employees, govt., owners, the community…..

Basic definitions

OperationalTacticalStrategic

2 new mkts

MKTG Dept

Adveristing

Logisitics

HR

Selection

Compensation

In a nutshell

• Where are we now?• Where do we want to go?• How will we get there?

Whole bunch of nutshells…..

• Corporate strategy• Business strategies• Functional strategies• Operating strategies

In another nutshell……

Resource

allocations

Your weaknesses

Your strengths

Expected reactionsby

competitors

Expected environ-mental changes

The Strategic Management Process(SWOT)

4-14

S/W

O/T

Sources of sustainable competitive advantage

• Valuable• Rare• Difficult to imitate• Non-substitutable• “organized” (?)

Core competencies

The Strategic Management Process

4-16

SWOT example

• SWOT in action

Corporate strategies

• Concentration• Vertical integration• Concentric diversification• Conglomerate diversification

Business strategy

• Porter’s 5 Forces

Potentialentrants

Threat ofnew entrants

PORTER’s 5 FORCES MODEL

Barriers to entry

• Access to inputs• Economies of scale• Government policy• Brand identity• Switching costs• Access to distribution• Expected retaliation• Proprietary products

Potentialentrants

Threat ofnew entrants

Buyers

Bargaining powerof buyers

PORTER’s 5 FORCES MODEL

Buyer power

• Buyer volume• Buyer information• Brand identity• Product differentiation• Buyer concentration vs. industry• Price sensitivity

Potentialentrants

Threat ofnew entrants

Buyers

Bargaining powerof buyers

Substituteproducts

Threat ofsubstitutes

PORTER’s 5 FORCES MODEL

Threat of substitutes

• Switching costs• Buyer inclination to substitute• Price-performance trade-off of substitutes

Potentialentrants

Threat ofnew entrants

Suppliers

Bargaining powerof suppliers

Buyers

Bargaining powerof buyers

Substituteproducts

Threat ofsubstitutes

PORTER’s 5 FORCES MODEL

Supplier power

• Supplier concentration• Differentiation of inputs• Cost relative to total purchases• Switching costs

Industry competitors

Rivalry amongexisting firms

Potentialentrants

Threat ofnew entrants

Suppliers

Bargaining powerof suppliers

Buyers

Bargaining powerof buyers

Substituteproducts

Threat ofsubstitutes

PORTER’s 5 FORCES MODEL

Intensity of competitor rivalry• Very high strategic stakes• Large number of firms• Diversity of rivals• Slow market growth• High fixed cost• Short shelf-life• Low switching costs

Target ScopeAdvantage

Low Cost

Product/ServiceUniqueness

Broad(Industry wide)

Cost Leadership Strategy(Sam’s)

Differentiation Strategy(Toyota)

Narrow(Market

segment)

FocusStrategy

(low cost)(Dollar General)

FocusStrategy

(differentiation)(Tiffany’s)

Strategies for Gaining Sustainable Competitive Advantage

• Cost leadership–Requires efficiency throughout–Same price, higher margins–Lower price, greater mkt share–All wages low?– Threat?

Strategies for Gaining Sustainable Competitive Advantage

• Differentiation – TREAD SOFTLY– Customer service, technological superiority– Changing the rules– Increased costs means must have higher price

Strategies for Gaining Sustainable Competitive Advantage

• Focus– Unique market niche– Premium price/differentiation– Great customer loyalty (why?)– Ex: Bad-credit finance companies, big & tall

men’s shops, petite dress shops

Does it work????

• Criticism #1– Assumes the world will "hold still while a plan is being developed

and then stay on the predicted course while that plan is being implemented."

• Criticism #2– Manage by objective measures of hard data,

• Criticism #3– Inflexibility– Focus on goals set, not goals that should be set

• Criticism #4– Monkey see, monkey do….– Bellbottoms and pet rocks