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Lecture Topics
Recall of Types of Plans Definitions of Strategies & Policies Commonalities & Differences between Strategies & Policies Strategic Planning process SWOT & TOWS Matrix Hierarchy of Strategies

Chapter

Strategies, Policies & Planning Premises

Types of Plans
1. 2.
Missions/ Purposes Objectives/ Goals

Strategy
The determination of the basic long term objectives of an enterprise and the adoption of course of action and allocation of resources required to achieve these goals.

3. Strategies 4. 4 Policies
5. 6.
Procedures Rules

7. Programs 8.
Budgets

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Policies
General statements or understandings that guide or channelize thinking in decision making. making.

Commonalities :Strategies & Policies

Both give direction Frame work for operational plans Effect all areas of managing
Strategies & Policies are closely related

Differences : Strategies & Policies

Strategies Determination of Long term Objectives The direction in which the resources will be applied Types:
Corporate Strategies Business Strategies Functional Strategies

Strategies Lead to Action Plans/ Tactics

Action Plan 1 Action Plan 2

Policies General Guidelines for decision making The essence of Policy is discretion i di ti Types:
Admin/ HR Policies O&M Policies Marketing/ Sales Policies Financial Policies

Strategy 1

Action Plan 3 Action Plan 4 Action Plan 5

A Plan, with details up to nuts & bolts of operation, is called Action Plan / tactic.

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Few Important Questions !

Where we are? (Assessment) Where we want to be? (Objectives) How do we get there? (Strategic Plan) How do we measure our progress? (Monitoring)

Strategic Planning Process

Strategic Planning Process

Strategic Planning Process

Vision T&O Short term Planning

Strategic Planning Process

Continuous lines Part of the Process Red Dashed Lines Ongoing Process of Monitoring & Control Blue Lines Two Way flow Colour filled Boxes Core boxes of the Process Colour filled Boxes Related to Ongoing Process

Inputs Industry Analysis Goals Co. Profile Alternative Strategies Evaluate & Selection Implementpe e t ation
Control

Mission

S&W

Organizing / Staffing

Contingency Planning

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Strategic Planning Process

Inputs Industry Analysis
External factors Kind of competition within industry Possibility of new firms into business Bargaining positions of Suppliers/ customers

Strategic Planning Process

Development of Alternative Strategies
On the basis of SWOT Analysis

Types of Strategies:
Integration Strategies
Forward Integration Backward Integration Horizontal Integration

Company Profile
Where is? (Financial health, market position, capabilities.. etc ) Where to go?( Long term objectives)

Intensive Strategies
Market Penetration Market/ Product Development

Vision & Mission Threats & Opportunities (External Environment) Strengths & Weaknesses (Internal Environment)

Diversification Strategies Defensive Strategies

Retrenchment Liquidation

Joint Ventures/ Mergers/ Strategic Alliance

Strategic Planning Process

Evaluation & Selection Risk consideration
Failure of profitable strategy may end up in p y Bankruptcy

Strategic Planning Process

Consistency Testing & Contingency Planning Very Important Un-predictable business environment Un predictable due to multiple variables Preparation for Contingency Plans
Examples:
Assumption of Political crisis Law & Order situation Energy Crisis Major Re-session etc . !

Timing consideration
Timely launch of a Project/ Product etc ..!

Reaction of Competitors
Expected response (strategy/ Tactics) of competitors

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SWOT
STRENGTHS
Activities an organization does well or resources it control

Strengths & Weaknesses

Strengths and weaknesses: to : Key areas:
Sales - marketing - distribution - promotion - support; Management - systems - expertise - resources; Operations - efficiency - capacity - processes; Products - services - quality - pricing - features - range competitiveness; Finances - resources - performance; R&D - effort - direction - resources; Costs - productivity - purchasing; Systems - organization - structures.

Internal & relate

resources, programs and organization

WEAKNESSES
Activities an organization does not do well or has loose control over resources

OPPORTUNITIES
Positive external environmental factors

THREATS
Negative external environmental Factors

Threats & Opportunities

Relate to external Following areas: The marketplace which may be altering due to:
Economic or social factors Customers; distribution channels; Political & environmental factors

SWOT & TOWS ??

SWOT Description TOWS SWOT in a Matrix for 04 distinctive sets
SO ST WO WT

Competition: creating new threats or opportunities

Identities, performances, market shares, likely plans, aggressiveness, strengths & weaknesses

New technologies: Causing fundamental changes in products, processes, etc.

Substitute products, alternative solutions, shifting channels, cost savings etc.

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Strategies : TOWS Matrix

SO : Perfect matching, go for the opportunities WO : Overcome weaknesses to pursue opportunities pp ST : Find ways that Strengths could be used to mitigate the threats WT : Convert or if not possible go for a Defensive Plan

Strategies : TOWS Matrix STRENGTH

WEAKNES
WO MINI-MAXI

O
P P R T U N I T E S

SO MAXI-MAXI

T
H R E A T

ST MAXI-MINI

WT MINI-MINI

Market, Competition, Customers - Environment

Important Points for TOWS

Scaling & Grading of each point of:
S, W, O & T Helps in Mathematical Modeling

Hierarchy of Strategies
Entire Organisation
Corporate Level One Business Group

Dynamic instead of Static y

Factors (External & Internal) are varying Past, Present & Future Periodic Analysis (T0, T1, T2 .)
Business Level

Different for different market/ product segments Multiple Software for TOWS analysis

One Department

Functional/ Operational Level

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Corporate Strategies
Overall Strategy for entire Organization
e.g. Nestle, PAK

Business Strategies
Second Level Strategies Developed by General Managers For a particular business Unit
Nestle, Drinking Water Nestle, Milk Nestle, Juices

Developed by Executives Decision relating to:

Industries in which the Co wants to Co. compete Selection of Businesses portfolio to achieve synergies among the business units Partnerships/ Merger etc.. Joint Programs

Reviewed, Approved/ Rejected by Chief Executive Aim To gain a competitive advantage in a Aim: particular product area

Functional Strategies
Third Level Strategies Developed by Department heads For a particular department
Marketing/ Sales Finance Fi Production HR & Admin etc

Reviewed, Approved/ Rejected by General Manager Aim To support the Business & Corporate Aim: Strategies