for meghna ma'am
TRANSCRIPT
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Strategic Planningfor Managers
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Contents
1. Five Tasks of Strategic Planning
2. Factors Shaping the Choice of Strategy
3. Three Tests of Best Strategy
4. Analyzing Industry Environment and Crafting
Competitive Strategy
5. Strategy Implementation and Execution
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Five Tasks of
Strategic Planning
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Five Tasks of Strategic Planning
Forming a
strategic
vision
Setting
objectives
Crafting a
strategy to
achieve the
desired
outcomes
Implementing
and executingthe chosen
strategy
Evaluating
performance,
monitoring new
developments,
and initiating
corrective
adjustments
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Forming a Strategic Vision
Forming a
strategic
vision
Very early in the strategy-making
process, company managers need to
pose a set of questions:
"What is our vision for the company
where should the company be
headed, what should its future
technology-product-customer focus
be, what kind of enterprise do wewant to become, what industry
standing do we want to achieve in
five years?"
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Setting Objectives
Setting
objectives
The purpose of setting objectives is
to convert managerial statements of
strategic vision and business mission
into specific performance targets results and outcomes the
organization wants to achieve.
Setting objectives and then
measuring whether they are
achieved or not help managers track
an organization's progress.
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ImproveCost Efficiency
Enhance Long-termShareholder Value
Increase Revenue Growth
EnhanceBrand Image
Build HighPerformance Products
Achieve
OperationalExcellence
Develop StrategicCompetencies
Drive Demand
through CustomerRelation Management
Manage Dramatic
Growth throughInnovation
Implement Good
EnvironmentalPolicy
Build LearningCulture
Expand Capabilities withTechnology
Strategic Objectives in Four Perspectives
Financial
Customer
Internal Process
Learning & Growth
ExpandMarket Share
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Crafting Strategy
Crafting a
strategy to
achieve the
desired
outcomes
A company's strategy represents
management's answers to such fundamental
business questions as :
whether to concentrate on a single business or build
a diversified group of businesses
whether to cater to a broad range of customers or
focus on a particular market niche
whether to develop a wide or narrow product line
how to respond to changing buyer preferences
how big a geographic market to try to cover
how to react to newly emerging market and
competitive conditions
how to grow the enterprise over the long term.
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What Does a Company's Strategy Consist Of?
Crafting a
strategy to
achieve the
desired
outcomes
Company strategies concern how:
how to grow the business
how to satisfy customers
how to outcompete rivals
how to respond to changing market
conditions
how to manage each functional piece of
the business and develop neededorganizational capabilities
how to achieve strategic and financial
objectives
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Strategy Implementation and Execution
Strategy implementation concerns the
managerial exercise of putting a freshly
chosen strategy into place
Strategy execution deals with the managerial
exercise of supervising the ongoing pursuit of
strategy, making it work, and showing
measurable progress in achieving the
targeted results.
Implementing
and executing
the chosen
strategy
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Strategy Evaluation and Monitoring
It is management's duty to stay on top of
the company's situation, deciding
whether things are going well internally,
and monitoring outside developmentsclosely.
Marginal performance or too little
progress, as well as important new
external circumstances, will require
corrective actions and adjustments.
Evaluating
performance,
monitoring new
developments,
and initiating
corrective
adjustments
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Strategy Hierarchy
Corporate
Strategy
BusinessStrategies
Functional Strategies (R&D,
Marketing, Manufacturing, HR,
Finance, etc.
Operating Strategies (regions,
plants, departments within
functional areas)
Strategy
hierarchy for
a diversified
company
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Strategy Hierarchy
Business
Strategies
Functional Strategies (R&D,
Marketing, Manufacturing, HR,
Finance, etc.
Operating Strategies (regions,
plants, departments within
functional areas)
Strategy hierarchy
fora single-business
company
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Strategy Hierarchy
Corporate
Strategic Vision
Functional
Areas Visions
Operating Unit Visions
Business-Level
Strategic Vision
Corporate
Strategic Objectives
Functional
Areas Objectives
Operating Unit
Objectives
Business-Level
Strategic Objectives
Corporate
Strategic Strategy
Functional
Areas Strategies
Operating Unit
Strategies
Business-Level
Strategy
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Factors Shapingthe Choice of Strategy
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Factors Shaping the Choice of Strategy
Economic,
societal, political,
and government
regulations
Competitive
conditions and
industry
attractiveness
Company
opportunity and
threat
Company strengthsand weaknesses,
competencies and
capabilities
Personal ambitions
and business
philosophies of key
executives
Shared values andcompany culture
External Factors
Internal Factors
The mix of considerations that determines
a companys strategic situation
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Factors Shaping the Choice of Strategy
Economic,
societal, political,
and government
regulations
What an enterprise can and cannot do
strategywise is always constrained by
what is legal, by what complies with
government policies and regulatoryrequirements, by what is considered
ethical, and by what is in accord with
societal expectations and the standards
of good social and community
citizenship.
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Factors Shaping the Choice of Strategy
An industry's competitive conditions
and overall attractiveness are big
strategy-determining factors.
A company's strategy has to be tailoredto the nature and mix of competitive
factors in playprice, product quality,
performance features, service, war-
ranties, and so on.
Competitive
conditions and
industry
attractiveness
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Factors Shaping the Choice of Strategy
A company's strategy needs to be
deliberately aimed at capturing its best
growth opportunities, especially the
ones that hold the most promise forbuilding sustainable competitive
advantage and enhancing profitability.
Strategy should also provide a defense
against external threats to the
company's well-being and future
performance.
Company
opportunity and
threat
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Factors Shaping the Choice of Strategy
One of the most pivotal strategy-shaping
internal considerations is whether a
company has or can acquire the
resources, competencies, and capabilities
needed to execute a strategy proficiently.
The best path to competitive advantage is
found where a firm has competitively
valuable resources and competencies,where rivals can't develop comparable
capabilities except at high cost or over an
extended period of time.
Company
strengths and
weaknesses,
competencies and
capabilities
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Factors Shaping the Choice of Strategy
Managers do not dispassionately assess
what strategic course to steer.
Their choices are typically influenced by
their own vision of how to compete and
how to position the enterprise and by what
image and standing they want the
company to have.
Personal
ambitions and
business
philosophies of
key executives
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Factors Shaping the Choice of Strategy
An organization's policies, practices,
traditions, philosophical beliefs, and ways
of doing things combine to create a
distinctive culture.
The stronger a company's culture, the
more that culture is likely to shape the
company's strategic actions, sometimes
even dominating the choice of strategicmoves.
Shared values
and company
culture
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Strategic Analysis and Strategic Choices
Analyzing
strategically
about industry
and competitive
conditions
Analyzing
strategically
about a
companys own
situation
What strategicoptions does the
company
realistically
have?
What is the best
strategy?
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Strategic Analysis and Strategic Choices
Analyzing
strategicallyabout industry
and competitive
conditions
The Key Questions
What are the industrys dominant economic
features?
What is causing the industrys competitive
structure and business environment to change?
Which companies are in the strongest/weakest
positions?
What strategic moves are rivals likely to make
next?
What are the key factors for competitive success?
Is the industry attractive and what are the
prospects for above-average profitability?
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Strategic Analysis and Strategic Choices
Analyzing
strategicallyabout a
companys own
situation
The Key Questions
How well is the companys present
strategy working?
What are the companys strengths,
weaknesses, opportunities, and threats?
Are the companys prices and costs
competitive?
How strong is the companys competitive
position?
What strategic issues does the company
face?
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Three Tests of Best Strategy
The
Performance
Test
The
Competitive
Advantage
Test
TheGoodness of
Fit Test
The Best
Strategy
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A good strategy has to be well matched
to industry and competitive conditions,
market opportunities and threats, and
other aspects of the enterprise's
external environment.
At the same time, it has to be tailored to
the company's resource strengths and
weaknesses, competencies, andcompetitive capabilities.
Three Tests of Best StrategyThe
Goodness ofFit Test
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A good strategy leads to sustainable
competitive advantage.
The bigger the competitive edge that
a strategy helps build, the more
powerful and effective it is.
Three Tests of Best StrategyThe
CompetitiveAdvantage
Test
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A good strategy boosts company
performance.
Two kinds of performance
improvements are the most telling of
a strategy's caliber: gains in
profitability and gains in the
company's competitive strength andlong-term market position.
Three Tests of Best StrategyThe
PerformanceTest
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Analyzing Industry Environment
and Designing Competitive Strategy
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Porters Five Forces
Rivalry
BuyerPower
Supplier
Power
Threats of
Substitutes
Barriers toEntry
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The Intensity of Rivalry
1. A larger number of firms
2. Slow market growth
3. High fixed cost
4. High storages costs or highly
perishable products
5. Low switching cost
6. Low level of product differentiation
7. Strategic stakes are high
8. High exit barriers
9. A diversity of rivals
10. Industry shakeout
The intensity of
rivalry is influenced
by the following
industrycharacteristics:
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Barriers to Entry
Entry barriers
are influenced by
the following
factors :
1. Absolute cost advantages
2. Proprietary learning curve
3. Access to inputs
4. Government policy
5. Economies of scale
6. Capital requirements
7. Brand identity
8. Switching costs
9. Access to distribution
10. Expected retaliation
11. Proprietary products
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Threats of Substitutes
Threats of
substitutes
are influenced by
the followingfactors :
1. Switching costs
2. Buyer inclination to
substitute
3. Price-performance trade-off
of substitutes
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Buyer Power
Buyer power
is influenced by
the following
factors :
1. Bargaining leverage
2. Buyer volume
3. Buyer information
4. Brand identity
5. Price sensitivity
6. Threat of backward integration
7. Product differentiation
8. Buyer concentration vs. industry
9. Substitutes available
10. Buyers' incentives
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Supplier Power
Supplier power
is influenced by
the following
factors :
1. Supplier concentration
2. Importance of volume to supplier
3. Differentiation of inputs
4. Impact of inputs on cost or
differentiation
5. Switching costs of firms in the
industry
6. Presence of substitute inputs
7. Threat of forward integration
8. Cost relative to total purchases
in industry
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Dominant Economic Characteristics of the Industry Environment (market size and growth rate,
geographic scope, number and sizes of buyers and sellers, pace of technological change and
innovation, scale economies, experience curve effects, capital requirements, and so on)
Competitive Analysis
Rivalry among competing sellers
Threat of potential entry
Competition from substitutes Power of suppliers
Power of consumersCompetitive Position of Major Companies/ Strategic Groups. Those that are favorably positioned, and why Those that are unfavorably positioned, and whyCompetitor Analysis
Strategic approaches/predicated moves of key competitors
Whom to watch, and whyIndustry Key Success Factors
Industry Prospects and Overall Attractiveness
Factors making the industry attractive Factors making the industry unattractive Special industry issues/problems Profit outlook (favorable/unfavorable)
Sample Form for an Industry and Competitive Analysis Summary
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Five Generic Competitive Strategies
Overall Low Cost
Leadership Strategy
Differentiation
Strategy
Focused Low Cost
Strategy
Focused
Differentiation
Strategy
Low Cost Differentiation
Broad Market
Segment
Narrow MarketSegment
Best CostStrategy
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Five Generic Competitive Strategies
Overall Low Cost
Leadership
Strategy
Broad
Differentiation
Strategy
Appealing to a broad spectrum of customers
based on being the overall low-cost provider
of product and service
A differentiation strategy calls for the
development of a product or service that
offers unique attributes that are valued by
customers and that customers perceive to be
better than or different from the products of
the competition
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Five Generic Competitive Strategies
Best Cost Strategy Giving customers more value for the
money by incorporating good-to-
excellent product attributes at a lower
cost than rivals
The target is to have the lowest (best)costs and prices compared to rivals
offering products with comparable
upscale attributes
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Generic Strategies and Industry Forces
IndustryForce
Generic StrategiesCost Leadership Differentiation Focus
EntryBarriers
Ability to cut price in
retaliation deters potential
entrants.
Customer loyalty can
discourage potential entrants.
Focusing develops core
competencies that can act as
an entry barrier.
Buyer
Power
Ability to offer lower price to
powerful buyers.
Large buyers have less power
to negotiate because of fewclose alternatives.
Large buyers have less power
to negotiate because of fewalternatives.
SupplierPower
Better insulated from
powerful suppliers.
Better able to pass on supplier
price increases to customers.
Suppliers have power because
of low volumes, but a
differentiation-focused firm is
better able to pass on supplier
price increases.
Threat ofSubstitutes
Can use low price to defend
against substitutes.
Customer's become attached
to differentiating attributes,
reducing threat of substitutes.
Specialized products & core
competency protect against
substitutes.
RivalryBetter able to compete on
price.
Brand loyalty to keep
customers from rivals.
Rivals cannot meet
differentiation-focused
customer needs.
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Strategy Implementation andExecution
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Strategy Implementation
Building a capableorganization
Designing strategy-
supportive reward system
Creating a strategy-
supportive corporate
culture
Exerting strategicleadership
Linking budget to strategy
Establishing strategy-
supportive policies and
procedures
Instituting best practices and
commitment to continuous
improvement
Installing information systemto support strategy execution
HR & OrganizationDevelopment Factor
System Factor
EffectiveStrategy
Execution
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Building a Capable Organization
Building a
capable
organization
Staffing the organization
Putting together a strong management team
Recruiting and retaining talented employees
Building Core Competencies and Capabilities Developing competence/capability portfolio
suited to current strategy
Updating and reshaping the portfolio as external
conditions and strategy change
Structuring the Organization and Work Effort
Organizing business function and processes,
value chain activities, and decision making
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Strategy-supportive Reward System
Designing
strategy-
supportive
reward
system
Strategy-supportive motivational practices
and reward systems are powerful
management tools for gaining employee
buy-in and commitment.
The key to creating a reward system that
promotes good strategy execution is to
make strategically relevant measures of
performance the dominating basis for
designing incentives, evaluating individual
and group efforts, and handing out
rewards.
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Strategy-supportive Corporate Culture
Creating a
strategy-
supportive
corporate
culture
Building a strategy-supportive culture isimportant to successful strategy execution
because it produces a work climate and
organizational esprit de corps that thrive
on meeting performance targets and beingpart of a winning effort.
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Strategic Leadership
Exerting
strategic
leadership
Strategic leaders encourage people to beinnovative in order to keep the
organization responsive to changing
conditions, alert to new opportunities, and
anxious to pursue fresh initiatives.
Strategic leaders also actively push
corrective actions to improve strategy
execution and overall strategic
performance.
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Linking Budget to Strategy
Linking
budget to
strategy
Reworking the budget to make it morestrategy-supportive is a crucial part of the
implementation process because every
organization unit needs to have the
people, equipment, facilities, and otherresources to carry out its part of the
strategic plan.
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Strategy-supportive Policy
Establishing
strategy-
supportive
policies and
procedures
Prescribing new or freshly revised policiesand operating procedures aids the task of
implementation (1) by promoting
consistency in how particular strategy-
critical activities are performed ingeographically scattered operating units
and (2) by helping to create a strategy-
supportive work climate and corporate
culture.
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Continuous Improvement
Instituting
best practices
and
commitment
to continuous
improvement
Competent strategy execution entailsvisible, unyielding managerial commitment
to best practices and continuous
improvement.
Benchmarking, the discovery and
adoption of best practices, and six sigma
initiatives all aim at improved efficiency,
better product, and greater customer
satisfaction.
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Information Support System
Installing
information
system to
support
strategy
execution
Company strategies cant be implementedwell without a number of support system
to carry on business operations.
Well-conceived, state-of-the-art support
system not only facilitate better strategy
execution but can also strengthen
organizational capabilities enough to
provide a competitive edge over rivals.
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Reference/Recommended Further Reading
Arthur Thompson and A.J. Strickland III, StrategicManagement : Concept and Cases, McGraw-Hill.
You can obtain this excellent book at this link : http://www.amazon.com/Strategic-Management-Concepts-
Arthur-Thompson/dp/0072443715/ref=sr_1_3?ie=UTF8&s=books&qid=1219804406&sr=1-3
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