STRATEGIC PLANNING

- It s a management task
- It is undertaken by large corporations

- Through this process :

 large corporations undertake the business planning job at the
corporate level
 It helps them to take care of its long term planning /interests in
different businesses

Meaning & Scope of strategic planning

 Any activity requires planning
 Business firms have to understand the business environment in order
to counter competition
 Thus planning is always strategic in nature
 Business firms cannot proceed with their business in a haphazard or
aimless manner
 It has to proceed with and under certain guidelines
 Strategic planning provides these guidelines
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- Strategic Planning lends a framework / structure for the corporation

 Decision is taken systematically

 Hence each and every move of the organization is meaningful,
purposeful and rewarding

- Strategic Planning is a stream of decisions and actions

 This leads to effective strategies for the firm to achieve its objectives

- Strategic planning helps to understand and anticipate

 The business trends
 The benefit of lead time for all its crucial decisions and actions
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- Through the Strategic Planning process

Decisions of highest significance and consequence are taken
Focus of a company is decided through the SP process

- Strategic Planning process helps a company

With certain competitive advantage in its fight for survival and growth
The more intense the competition the more critical is the need for
competitive advantage and competitive strategies
Both emanate from intense and enduring strategic planning process
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- Strategic Planning means performing all he undernoted

activities
Authorities at corporate level do a lot of research & thinking
They bring forth the ambition
Understand the organizations core competencies
They identify the competitive advantage
Identify shortcomings
Decide the business in which it should stay and have a strong
presence
Decide on the strategies to employ
Knowing the organization, its business and environment
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Basic steps in strategic planning

Defining the business of the firm

Environment scanning : spotting the opportunities and

threats

Internal scanning : assessing the strengths and

weaknesses identifying the core competencies and
competitive advantage

Setting up corporate level objectives

Forging the corporate level objectives

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Defining the business of the firm

A very important requisite task for selecting the right

opportunities

For steering the firm in the right direction

Many changes in the environment, competition and Govt.

policies

A firm has to understand what business it exactly is in

While doing this the following are the often asked questions
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Questions often asked

 What business are we in?

 Who do we want to serve?

 Do we accurately define our business?

 Do we define our business in its broadest connotation?

 Do we know our customers?

 What brings us to this particular business?

 What would be the nature of business in future?

 In what business would we like to be in future?

 What are our basic strengths and capabilities to pursue present business?

 Do we need to branch of into any other desired business?

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Attributes to a good business definition

Should be related to he function of the product and not limited

to the product

It must consider all related areas / functions as far as possible

It must be wide enough to embrace new opportunities

It must be wide enough to give a vision of latent source of

competition from substitute products

It must not forget he basic capabilities and limitations of the

organization in an eagerness to meet objectives
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The Strategic planning process

1. Define the business of the organization

 What business are we in?

2. Environment scanning
 Spotting the opportunities and threat
 Analyzing Govt. policies
 Analyzing technology options
 Analyzing market and competition (economic environment)
 Scenario analysis – favourable and unfavourable
 Pinpointing business opportunities actually available

3. Internal scanning
 Assessing the strengths and weaknesses of the organization
 Identifying he core competencies and competitive advantages
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ANALYTICAL MODEL TO STRATEGIC PLANNING : BCG MATRIX
(BOSTON CONSULTING GROUP – GROWTH SHARE MATRIX)

HIGH LOW

HIGH
QUESTION
STARS MARKS MARKET
GROWTH
LOW
PROBLEM
CASH CHILD /
COWS
MARKET
DOGS
SHARE
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The Strategic planning process

1.STARS
Business with high growth and high market share potential
Nett users of resources
Requires god deal of investment
Does not bring immediate returns / profits
Holds great future potential
Medium risk category

2.QUESTION MARKS
Business with high growth potential but low market share
Also Nett users of resources
Future however is not certain
High risk category
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The Strategic planning process

3. CASH COWS
Business with low growth potential but high market share
Nett generator of resources
Brings a lot of cash to the organization
It does not need heavy investment
Expansion possibility
Organizations keep milking the cash cows

4. PROBLEM CHILD / DOGS

Business with low growth and low market share potential
Drag on he company’s resources
Poses serious problems for organizations w.r.t. resource
allocation
Tough time for organization s to take a strategic decision
Requires a lot of introspection
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The Strategic planning process

4. Setting Corporate level objectives / strategies

 This is with regard to long term planning

 Stability Strategy : Staying in the same business by maintaining the market share and
profitability. Safe, commanding position , market leaders
 Expansion Strategy: Growth by staying in the same business . Expansion in size. Increase in
capacity.
 Diversification Strategy: Going in for an entirely new business
 Retrenchment Strategy: Drop unattractive business. May not always be due to failure but also
due to anticipation of threats that may lead to failure. Decision of future
 Combined Strategy: Combination of all the above or some as may be applicable

5. Forging the Corporate Level Strategies

 By effective monitoring and control
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The Strategic planning process

4. Setting Corporate level objectives

This is with regard to long term planning

Interests in present business and different businesses
Expansion
Modernization
Products and services etc

5. Forging the corporate level objectives

Stability
Expansion
Diversification
Retention
Combination of two or more of the above