This action might not be possible to undo. Are you sure you want to continue?
It is a management task concerned with the growth & future of a business. It involves decisions & actions that lead to effective strategies & help the firm achieve its growth objectives. It helps an organisation to answer some basic and critical questions like: Where we stand? What is our goal? How to reach the desired goal? How to evaluate performance?
Nature, Importance & Scope of Strategic Planning: It serves as a road map for the company. It lays down the growth objectives of the firm. It provides strategies needed for achieving them. It serves as a hedge against uncertainty arising from environmental turbulence. It helps companies understand trends in advance It helps avoid haphazard response to environment. It provides the best possible fit between the firm & external environment. It ensures the firm’s businesses, products & markets are chosen wisely. It ensures best utilisation of firm’s resources. It helps build competitive advantages & core competencies. It is drawn from intuition & logic.
Components of Strategic Planning
1. 2. 3. 4. 5. Clarifying the mission of the company Defining the business Surveying the environment Internal appraisal of the firm Setting the corporate objectives
It helps in understanding the environment in which the firm is operating. 7. 1. Formulating the corporate strategy Clarifying the mission of the company Mission is expression of company’s intent. Certain Basic Questions 1. It clarifies the purpose of organisation. leaders. 2. It carries the grand design of the company. Defining the Business Correct business definition is required for selecting the right opportunities For formulating strategy. 8. It tells insiders & outsiders about what the company stands for. 5. 4. It is `guiding principle of corporation It indicates the businesses the firm will pursue & customer’s needs it Mission is given shapes by the capabilities & vision of business Mission expresses the business philosophy of the founder & present will seek to satisfy. 2. otherwise company cannot fix its corporate objective in a proper manner. 3. leaders. proper definition of business is required.6. What business we are in? Whom do we intend to serve? Do we accurately define our business? Do we define our business in its broadest implication? Do we know our customer? What bring us to this particular business? What would be the nature of this business in the future? In what business would we like to be in the future? . 6.
Legal & Political Environment.9. culture External Environment – Macro: Political. Economic. economical. Internal Environment – Micro: People. social. The company studies the – Demographic. legal. Surveying the Environment In environmental survey. Marketing Environment comprises of 2 elements: 1. etc 2. capabilities. Socio-cultural. technological PEST Framework for Environmental Scanning . systems. It analyses the macro environmental factors that are specific to the business. It prescribes the boundaries of the firm’s businesses. business? What are our basic strength & distinctive capabilities to pursue the present Business Definition: it is a concise. companies gather all the relevant information. clear-cut statement of the business/businesses the firm is engaged in or is planning to pursue. infrastructure.
4. SWOT leads to development of short-term & long-term objectives. 2. Weaknesses: Constraining factors that hinder the institution’s ability to achieve its desired goals. It is used as part of Strategic Planning Process. Opportunities and Threats involved in a business.Organisation Marketing Environment SWOT Analysis 1. Contributing Factors: People (Teachers/Staff/Students) Programmes (UG/PG/Doctoral) Properties (Assets/Infrastructure/Lab) Processes (Teaching/Research) . Weaknesses. 3. SWOT provides clarity on where we stand & in which direction we should move. It is a planning tool used to identify Strengths. Strength-Weakness Analysis Strengths: Positive aspects which are within the control of the institution.
Strengths Highly competent faculty with Ph.D. Modern laboratories & equipments Unique programmes offered Value adding additional programmes Reputation & brand image Examination & Evaluation Process Research projects/Consultancy Industry interactions Weaknesses Lack of competent/qualified staff Inadequate facilities/labs Outdated syllabus/courses Lack of industry orientation Weak employability of students Lack of research activities Internal Funding difficulties for projects External Environment: Analysis of External Environment leads to identification of: Opportunities: Attractive factors that help an institution to develop & improve Threats: Factors beyond the control of an institution that potentially damage the present existence and future development Opportunities & Threats Contributing Factors: Technological Economic Legal/Regulatory Social .
Demographic Political Opportunities Threats Competition from new entrants at local. national & international level Decreasing scope for some programmes Change in Technology Declining availability of qualified faculty Decline in the overall quality of student intake Tight regulatory measures Growing demand for various courses Growing demand for Technically qualified people New Technology Developments Research opportunities in specialised and niche areas Collaborations with industry Collaborations with institutes of higher learning (national & international) Why SWOT? Strengths – How to leverage? Weaknesses – How to overcome? Opportunities – How to exploit? Threats – How to defend? While doing SWOT Strengths – Modest & Clearly identifiable Weaknesses – Exhaustive .
Opportunities – Realistic & Identifiable Threats – Clearly identifiable BCG Matrix: It is a Growth-share matrix .
high market share) . question marks will simply absorb great amounts of cash and later. Relative market share (horizontal axis) refers to the SBU’s market share relative to that of its largest competitor. high market share) If the question mark business is successful. Have the worst cash characteristics of all. Either invest heavily/sell off/invest nothing and generate whatever cash it can. A question mark requires a lot of cash because a company has to spend a lot of money on overtaking the leader (& has to think hard before doing so). Question marks (high growth. each indicating a different type of business. low market share) Most businesses start off as question marks as the company tries to enter a high-growth market in which there is already a market leader. as the growth stops. because high demands and low returns due to low market share If nothing is done to change the market share. Growth-share matrix is divided into 4 cells. A star is the market leader in a high-growth market A star does not necessarily produce a positive cash flow for the company Company must spend substantial funds to keep up with the high market growth & fight off competitors’ attacks Use large amounts of cash and are leaders in the business so they should also generate large amounts of cash Stars tend to generate high amounts of income Cash cows (low growth. which indicates the annual growth rate of the market in which the business operates. a dog. it becomes a star. Increase market share or deliver cash Stars (high growth. Market growth rate is on the vertical axis.
Since the business is the market leader. There is another assumption that SBUs will cooperate. When a market’s annual growth rate falls to less than 10%. When Boeing launch a new jet. These are areas of the business rather than products. investments needed should be low Dogs (low growth. it may gain a high market share quickly but it still has to cover very high development costs. The main problem is that it oversimplifies a complex set of decision. Profits and cash generation should be high. Dogs often consume more management time than they are worth & need to be phased out Beware of expensive ‘turn around plans’ Deliver cash. . This is an SBU not a single product use the Matrix as a planning tool and always rely on your gut feeling. otherwise liquidate They do not generate cash for the company. low market share) Businesses that have weak market shares in low-growth markets. A cash cow produces a lot of cash for the company. Be careful to High market share is not the only success factor Market growth is not the only indicator for attractiveness of a market Sometimes Dogs can earn even more cash as Cash Cows For example. This may not always be the case. it enjoys economy of scale & higher profit margins. The company does not have to finance a lot of capacity expansion because the market’s growth rate has slowed down. although they may generate some cash. Company uses cash cows to pay bills & support other businesses. It is normally applied to SBUs. and because of the low growth. they tend to absorb it Avoid and minimize the number of dogs in a company Problems with BCG Matrix There is an assumption that higher rates of profit are directly related to high rates of market share. This is not always the case. They typically generate low profits or losses. the star becomes a cash cow if it still has the largest relative market share. Ford own Landrover in the UK.
reposition the brand Product is not altered and company do not seek any new customers Market Development Market our existing product range in a new market Product remains the same..g. or marketing it in a new region Product Development New product is to be marketed to our existing customers Develop and innovate new product offerings to replace existing ones Products are then marketed to our existing customers This often happens with the auto markets where existing models are updated or replaced and then marketed to existing customers Diversification We market completely new products to new customers .Ansoff’s Matrix Market Penetration Companies market its existing products to existing customers. Exporting the product. but it is marketed to a new audience E. Company promotes the product.
e.we remain in a market or industry with which we are familiar.we have no previous industry/market experience. the food industry) Unrelated diversification . For example. For example a soup manufacturer invests in the rail business. a soup manufacturer diversifies into cake manufacture (i. Companies are successful to the extent that they enter attractive markets & possess the required business strengths to succeed in those markets . The General Electric Business Screen: (GE Business Screen Matrix) Each business is rated in terms of market attractiveness & business strength. 2 types of diversification: related & unrelated Related diversification .
law & energy efficiency Environmental impact Competitive position Market share Management profile R&D Quality of products & services.g. Market Attractiveness: Size of market Market rate of growth Nature of competition & its diversity Profit margin Impact of technology. average business units in attractive industries. and weak business in attractive industries. Appropriate for strong cash cows if they are to continue yielding a large positive cash flow. . Harvest Objective is to increase the SBU’s short-term cash flow regardless of long-term effect. If 1 of the factors is missing. HOLD average businesses in average industries. even forgoing short-term earnings. strong businesses in weak industries.. Appropriate for question marks whose market shares must grow if they are to become stars GROW strong business units in attractive industries. & strong business units in average industries Hold Objective is to preserve SBU’s market share. strong company in unattractive market or weak company in attractive market will not do well). Branding & promotions success Place (or distribution) Efficiency Cost reduction Build Objective is to increase the SBU’s market share. the business will not produce outstanding results (for e.
Appropriate for dogs & question marks that are dragging down company’s profits. Company plans to milk its business. become stars. Involves a decision to eventually withdraw from a business by implementing a program of continuous cost retrenchment. Marketing Mix . then cash cows & finally dogs. average business units in unattractive industries. and weak business units in average industries Divest Here the objective is to sell or liquidate the business because resources can be better used elsewhere. HARVEST weak business units in unattractive industries. SBUs start as question marks. Hope is to reduce costs at a faster rate than any potential drop in sales thus increasing company’s cash flow. Appropriate for weak cash cows.
Physical evidence satisfaction. manufacturing & physical distribution (they need less marketing skills).3 additional P’s in services marketing People: Any person coming into contact with customers can have an impact on overall Process: Process (es) involved in providing a service and the behaviour of people. idiot outside! . Differentiation – business concentrates on achieving superior performance in an important customer benefit area valued by a large part of the market. put them together expertly etc. which can be crucial to customer satisfaction. 2. the Chinese Dragon!).g. 4 A’s Acceptability Affordable Accessible Awareness Solution Sense Spread 4 S’s Supports PACS Matrix Product Price Place Promo Acceptability Acceptable Access Awareness Customer Sol Cost Convenience Communicate Solution Sense Spread Support Porter’s generic strategies 1. Overall cost leadership – business works hard to achieve lowest production & distribution costs so that it can price lower than competition & win a large market share. Problem is competition operating with even lower costs (e. For ex Intel inside. Firms pursuing this strategy must be good at engineering. (It’s a Sony!). purchasing. So the firm seeking quality leadership must make products with best components.
Focus – business focuses on 1 or more narrow market segments. Clear-cut objectives facilitate the corporation’s progress along its intended over the planning period & its Aspirational level. Objectives have to be stated in a measurable & time-bound manner. Formulating the Corporate Strategy Corporate strategy denotes the company’s portfolio of businesses & Corporate strategy specifies which business & what kind of product-market From the statement of corporate strategy. its achievable level Company figures out its growth objective by balancing the opportunities Objectives have to be clear & specific so that they can guide performance. 5. 2. 6. Company examines its – Present level of performance. with its capabilities & ambitions. targets. gets to know these segments intimately & pursues either cost leadership or differentiation within the target segment (niche marketing). . 5. defined its business & scanned its environment and internal capabilities. its main task of the company now is to decide the extent of business growth. 3. 6. product-market exposure. 4. directions & priority. Once the company has clarified its mission.3. path. combination is the growth objective has to be achieved. companies derive its growth. Setting the Corporate Objective 1.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.